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Income Tax Appellate Tribunal, DEHRADUN “DB” BENCH: DEHRADUN
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
The present appeal is filed by the assessee against the order dated 24.10.2024 of Ld. Commissioner of Income Tax (A)-3, Noida [“Ld. CIT(A)”] in Appeal No. CIT(A), Kanpur-4/10080/2014-15 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 23.02.2021 passed u/s 147/143(3) r.w.s. 144B of the Act pertaining to Assessment Year 2015-16.
Brief facts of the case are that assessee is an individual and filed his return of income u/s 139(1) of the Act on 15.04.2016, declaring total income of INR 6,93,890/-. Case of the assessee was re-opened on the basis of material found during the search in the case of one Shri Amit Sharma as per which, assessee received cash loan of INR 50.00 Lakhs and paid interest of INR 4,94,750/- and notice u/s 148 was issued on 16.03.2020. In response to the said notice, assessee filed return of income on 27.06.2020, declaring same income as was declared u/s 139(1) of the Act. Thereafter, various notices were issued from time to time, and after considering the replies filed by assessee, re-assessment order was passed. The AO by alleging that assessee received cash loan of INR 50 Lakhs and paid interest as confirmed in the statement of Shri J.P. Sharma recorded u/s 132(4) of the Act and made the addition of INR 54,94,750/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 24.10.2024, has confirmed the order of AO and dismissed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- A) “That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021, which is nullity and is void ab initio and unlawful and is passed without authority of law. B) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021, based on illegal/invalid jurisdictional notice u/s 148 dated 16.03.2020. C) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021, which is totally contrary to mandate of 1961 Act and totally lacks fulfillment of requisite preliminary conditions stipulated under the Act.
D) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021 which is ex facie contrary to CBDT DIN Circular 19/2019 dated 14.08.2019; E) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021, without valid "supply" of relevant reasons to believe if any u/s 148(2) and valid sanction u/s 151 sans which entire proceedings are invalid; F) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021 as ex-facie there is no valid "reasons to believe" u/s 148(2)/sanction u/s 151 sans which entire impugned reopening proceedings are vitiated; G) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not quashing the impugned assessment order passed u/s 147/143(3) of "1961" Act dated 23.02.2021which is passed in totally "ARBITRARY" manner without any application of mind much less independent application of mind (as there is no relevant statutory provision spelt out at any stage under which addition is made); H) That Ld CIT-A vide impugned order passed us 250 dated 24.10.2024 erred in not deleting the impugned addition amounting to Rs 54,94,750 which impugned addition is "arbitrarily" made/sustained as apparently there is no valid legal justification/basis for the same.”
Ground of appeal No.(A) raised by the assessee is general in 5. nature, needs no separate adjudication hence, dismissed.
Ground of appeal No.(D) is not pressed thus, dismissed. 6.
Grounds of appeal Nos.(B), (C) & (E) raised by the assessee are with respect to the re-opening of assessment based on illegal and invalid approval thus they are taken together for consideration.
Before us, Ld.AR submits that despite of repeated requests, reasons recorded before re-opening of assessment were never provided to the assessee. He further submits that copy of the Approval memo u/s 151 of the Act by the Competent Authority was not provided thus, it is not clear whether valid sanction was taken or not by the AO. It is thus submitted that the proceedings initiated without supply the reasons recorded and the material relied upon, deserves to be bad in law and consequent assessment order passed, deserves to be quashed.
Reliance is placed on the judgement of Hon’ble Patna High Court in the case of Kishore Kumar Singh vs Deputy/Assistant CIT, Circle-4, Patna in Civil Writ Jurisdiction Case No.587 of 2022 dated 22.04.2025 wherein Hon’ble Patna High Court has held that “once the assessee has filed the return of income, the assessee be provided an opportunity to object the re-opening of assessment by supplying the materials. In absence of the non- supply of the reasons alongwith material, it could not be stated that the assessee was provided a reasonable opportunity of being heard.”
10. With regard to non-supply of copy of sanction memo u/s 151, Ld. AR relied upon the judgement of Hon’ble Jurisdictional High Court in the case of Tia Enterprises P. Ltd. vs ITO (2024) 468 ITR 5 (Delhi) and decision of Co-ordinate Bench of Delhi Tribunal in the case of Sunil Kumar Jain in dated 15.04.2025,wherein it is held that in absence of the sanction u/s 151, the assumption of jurisdiction u/s 147 is flawed and re- assessment proceedings were quashed. Ld.AR further placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of ITO vs B.C. Enterprises in & C.O.No.08/Del/2025 order dated 04.04.2025 wherein Co-ordinate Bench has held that non-supply of the information alongwith notice u/s 148A(b) of the Act would be a fatal error and consequent re- assessment proceedings are invalid. He therefore, prayed that the consequent notice issued u/s 148 of the Act deserves to be hold bad in law and re-assessment order passed be quashed.
11. On the other hand, Ld. Sr.DR for the Revenue vehemently supported the orders of lower authorities and submits that re- opening was made in accordance with law on the basis of the material found during the course of search and therefore, he prayed for the confirmation of the re-assessment proceedings being invalid.
12. Ld. Sr.DR further supports the order of Ld.CIT(A) and submits that Ld. CIT(A) relied upon the judgement of Hon’ble Jurisdictional Delhi High Court in the case of Pr.CIT vs Paramaount Communication (P.) Ltd. [2017] 79 taxmann.com 409 (Delhi) and therefore, it could not be hold that assessee was not supplied the material. He prayed accordingly.
13. Heard the contentions of both parties and perused the material available on record. The assessee since beginning of the proceedings, objected the initiation of re-assessment proceedings and after filing the return of income in response to 148 proceedings, asked the AO for supply the material relied upon, based on which case of the assessee was re-opened. In the case of Kishore Kumar Singh (supra), the Hon’ble Patna High Court has discussed this issue and held as under:-
"Core issue involved in the present lis is whether notice under Section 148 of the Income Tax Act, 1961 requires reasons in support of notice or not. We are of the view that whatever notice issued by the official respondent, it must be supported by reasons otherwise aggrieved person has no opportunity of filing his detailed explanation to such notice. Reading of the aforementioned notice, it is very bald and vague, resultantly, petitioners are not in a position to submit their explanation effectively. Core issue involved in the present lis is whether official respondent while issuing notice under Section 148 of the Income Tax Act, 1961 require to furnish reasons or not? The learned counsel for the petitioners submitted that reasons are mandatory requirement to meet Article 14 of the Constitution of India otherwise petitioners are not in a position to submit their explanation in effective manner. It is also submitted that respondents while issuing notice under Section 148 are exercising quasi judicial functions, therefore, any quasi judicial action taken by the official respondent, it must be supported by reasons otherwise aggrieved person has no opportunity of submission of effective reply to the notice. Learned counsel for the respondents relied on the cited decisions supra to contend that no reasons are required to be furnished along with the notice under Section 148, the same cannot be appreciated for the reasons that assuming that Section 148 does not prescribe notice must be supported by reasons, it is a quasi judicial function of the authority and it has repercussion insofar as in submitting effective reply or material to the notice issued under Section 148. In other words, reasonable opportunity is not provided to meet the notice. In the absence of any specific stipulation of assigning reasons under Section 148, still the authorities were required to follow the principles laid down by the Hon'ble Supreme Court in the case of Oryx Fisheries Private Limited vs. Union of India and Others reported in (2010) 13 SCC 427. That apart, the Constitution Bench of the Hon'ble Supreme Court in the case of Managing Director, ECIL, Hyderabad and Others vs. B. Karunakar and Others reported in (1993) 4 SCC 727, in which it is held that if the statutory provision does not provide issuance of second show cause notice and the inquiring officer's report, still the disciplinary authority was required to issue second show cause notice along with inquiring officer's report, the same principle is applicable to the case in hand to the extent of meeting Article 14 of the Constitution of India. Decision in the case of GKN Driveshafts (cited supra) it is not that reasons have not been issued along with the notice, there are dearth of reasons, the same decision is not applicable to the case in hand, on the other hand, in the present case not even iota of material like reasons supporting the notice. The general principle insofar as providing opportunity or reasons in support of any adverse order or civil consequence, in such circumstance invariably reasons must be supported. In the present case, by virtue of notice under Section 148, petitioners are required to submit their explanation or whatever the materials. In this regard, unless and until petitioners are made known that they have to answer to the notice and it is not supported by reasons, otherwise they are not in a position to submit effective reply/explanation with the material information. On this score the petitioners have made out a case. Reserving liberty to the respondents to issue fresh notice supported by reasons, such exercise shall be undertaken within a period eight weeks from today, reserving liberty to raise such other contentions on behalf of the petitioners are left open to be urged before concerned authority/forum".
14. Further, Hon’ble Delhi High Court in the case of Tia Enterprises P. Ltd. (supra) held that in absence of approval u/s 151, consequent re-assessment proceedings are invalid. Relevant observation of the Hon’ble High Court has held as under:-
“To our minds, the approval granted by the statutory authorities, as required under the provisions of the Act, has to be furnished to an assessee along with the reasons to believe. The statutory scheme encapsulated in the Act provides that reassessment proceedings cannot be triggered till the Assessing Officer has reasons to believe that income, which is otherwise chargeable to tax, has escaped assessment and the reasons recorded by him are placed before the specified authority for grant of approval to commence the process of reassessment." 15. The Co-ordinate Bench of Delhi Tribunal in the case of ITO vs B.C. Enterprises (supra) had made the following observations:-
We have heard the rival submissions and perused the material available on record. In the instant case, the assessee since inception of the proceedings asked the AO for supply of the material relied upon for initiating proceedings u/s 148A of the Act. The Hon’ble Supreme Court in the case of Ashish Agarwal reported in [2022] (5) TME-240(SC) has held that material relied upon for initiating the proceedings u/s 148A should be supplied to the assessee so as to enable him to file the necessary reply.
The provisions as assessee contended u/s 148A at the relevant point of time are as under: “148A. Conducting inquiry, providing opportunity before issue of notice under section 148. The Assessing Officer shall, before issuing any notice under section 148,— (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, [***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c)consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,— (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 2 [relate to, the assessee; or (d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.] Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]”
From the perusal of the provisions of section 148A, it is clearly provided in sub-section (a) that before issue of notice u/s 148, AO should conduct enquiry with the prior to approval of the specified authority with respect to information suggest the income chargeable has escaped assessment. In the instant case, from the perusal of the notice issued u/s 148A(b) it appears that though the said notice was issued with the prior approval of the PCIT, Delhi-20, however, no material whatsoever was supplied nor the results of the enquiries, if any, conducted were confronted to the assessee and it is merely stated that based on the information received through insight portal it was found that assessee was having accommodation entry in the shape of bogus purchases. It is also seen that assessee in reply to the said notice had filed a detailed reply on 24th March, 2020 which was sent through email to the AO, however, such reply was not considered and the order was passed u/s 148A(d) recording the satisfaction that it is a fit case for issue of notice u/s 148 of the Act.
13. Further from the perusal of the order passed u/s 148A(d), we observed that the AO in para 3 of the order observed that the information was self-sufficient and it was considered that further enquiries u/s 148A(a) of the Act are not required. However, when we see the information as provided to assessee along with notice u/s 148A(a) as “Annexure” and reproduced herein above, we find that such information did not speak about the real transactions. It is simply stated that assessee has made bogus purchases in the form of accommodation entries provided by Ahok Kumar Gupta and other entities operated and controlled by him. It is also stated that such information was received through insight portal. However, nowhere it is stated as to how department was having such information, who is Ashok Kumar Gupta, what is the nexus between assessee and Ashok Kumar Gupta, which are the entities managed and controlled by him and which of such entities had sold good to assessee alleged as accommodation entry. Further the details of purchases made, date of transactions, item, value of each individual transaction of purchases etc. were never brought on record as provided in sub-section (a) to section 148A of the Act. Further, AO has never provided the statements of such Ashok Kumar Gupta and the other relied upon material based on which of transactions were alleged as accommodation entry of purchases alongwith the notice u/s 148A(b) of the Act. It appears that the AO simply proceeded to reopen the case of the assessee based on the information available on the insight portal which is uploaded under Risk Management Strategy formulated by CBDT and no independent application of mind by AO before using such information against the assessee nor any enquiry was made as provided in section 148A(a) of the Act. This action of AO is highly arbitrary as he failed to appreciate the intent of the legislation behind introduction of provisions of section148A before issue of notice u/s 148 of the Act. The AO not only proceeded to issue notice u/s 148A(a) without making verification of the vague and insufficient information available with him to satisfy himself that income chargeable to tax has escaped assessment but at the same time also failed to provide the material relied upon to the assessee along with notice u/s 148A(b) of the Act. The Hon’ble Supreme Court in the case of Ashish Agarwal (supra) has held that AO should supply the relied upon material to the assessee so as to enable him to respond the show cause notice issued by AO. We also observed that ld. CIT(A) while dismissing this plea of the assessee in para 5.4.3 of the order has observed that department was in possession of the material which also include the statement of Shri Ashok Kumar Gupta. However, at no stage of proceedings u/s 148A of the Act, such statements were supplied to the assessee for rebuttal.
Further, from the perusal of the assessment order, it is seen that the Assessing officer has relied upon the statements of Sh. Ashok Gupta and also referred the results of the enquiry conducted u/s 133(6) of the Act from the respective parties, however, despite of request made by the assessee for cross examination of all such parties, no such opportunity was provided to assessee. It is settled proposition of law that if the Revenue is using the statement of third parties, the assessee should have been allowed an opportunity to cross examine those witnesses as has been held by the Hon’ble Supreme Court in the case of Adman Timber Products reported in 281 CTR 241. The relevant observations of the Hon’ble Court as under: "6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross examine those dealers and what extraction the appellant wanted from them." [Emphasis supplied]”
The Co-ordinate Bench of Tribunal in the case of Best City Infrastructure Ltd. vide order dated 31.05.2016 has held that not providing opportunity of cross examination makes the addition invalid. This order is upheld by Hon’ble Delhi High Court as reported in 397 ITR 82. Similar view is expressed by Hon’ble High Courts in following cases: -PCIT vs. Pavitra Realcom Pvt. Ltd. in (Delhi) -PCIT vs. Esspal International Pvt. Ltd. in (Rajsthan) -Dr. M. Malliya vs. ACIT in TCA No.284/11 (Madras). Therefore, not providing the opportunity to cross examine the witness whose statements are relied upon by the Revenue is gross violation of principal of natural justice. Moreover, the AO has failed to consider the reply filed by the assessee in response to notice issued u/s 148A(b) of the Act. Hon’ble Rajsthan High Court in the case of R.K. Buildcreations (Pvt.) Ltd. vs. ITO reported in [2024] 462 ITR 478 (Raj) has held as under: “It is mandatory for the AO to pass speaking order, taking into consideration not only the material on record but also the reply filed. The additional reply dt. 14.06.2022 was not considered, consequently there was no occasions to deal with the objections raised therein. The impugned order is not as per the procedure prescribed u/s 148A of the Act and cannot stand judicial scrutiny.” Thus, non-consideration of the reply filed by the assessee also render the reassessment order passed as invalid.
After considering the above discussion, we are of the view that the Assessing Officer has failed to comply with the direction given by the Hon’ble Supreme Court in the case of Rajiv Bansal (supra) and also the assessee Ashish Agarwal (supra) wherein it is held that AO should provide all the information and relied upon material available with him to the assessee alongwith notice u/s 148A(b) of the Act. Nor the reply of the assessee was considered before passing order u/s 148A(a) of the Act. Accordingly, in our considered view notice u/s 148 is bad in law and thus, the entire reassessment proceedings is held as invalid and is hereby quashed. The cross objections of the assessee taken in ground of appeal no.1 to 5 of the assessee C.O. are allowed.”
16. It is further seen that AO has re-opened the case of the assessee for the reason that assessee has received cash loan of INR 50 Lakhs. It is found that a search was carried out in case of third person and during the course of search, certain loose papers containing entries of Rs. 50.00 Lakhs given to the assessee were found noted. According to the reasons recorded, as reproduced at page 2 of the assessment order, the AO recorded the satisfaction that assessee has violated the provision of section 269SS & 269T of the Act however, no penal proceedings were advised to be initiated in the order passed u/s 147 r.w.s 143(3) of the Act. Further, the AO has not recorded any satisfaction with respect to escapement of income of Rs. 50.00 lacs for which addition was made. Admittedly as per the reasons recorded, assessee received cash loan from Shri J.P. Sharma in whose case, search was carried out, and it is settled law that receipt of loan cannot be held as income in the hands of the recipient when the identity of loaner is known and his creditworthiness is not doubted. This clearly suggests that case of the assessee is re-opened on vague reasons which were recorded without application of mind solely based on the information received from Investigation Wing that too with respect to the cash loan and not related to any undisclosed/ unaccounted for income.
Looking to these facts and circumstances of the case, we are of the considered view that the re-assessment proceedings initiated in the case of the assessee, suffers serious defects and accordingly, notice issued u/s 148 is hereby, held as invalid and consequent re- assessment order passed is hereby quashed. Accordingly, Grounds of appeal Nos. (B), (C) and (E) raised by the assessee are allowed.
The remaining Ground of appeal Nos. (F), (G) and (H) raised by the assessee being academic, are not adjudicated.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 26.09.2025.