DCIT, CIRCLE - 10(1), NEW DELHI vs. INTERLINK FOODS PRIVATE LIMITED, SOUTH DELHI

At the time of hearing, ld. AR of the assessee brought to our notice above 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 reasons recorded for issuing notice u/s 148 of the Act and subsequently assessee filed objections against the above reasons recorded by the AO and further he brought to our notice page 3 of the assessment order wherein AO himself records as, “it is pertaining to mention here that there was a typographical mistake at the time of recording the reasons for reopening of the case. Moreover, the transaction reported by the wing was squared up loan and since no assessment had been carried out before, there was no way before the AO to find out the exact nature of the transaction that was reported by the Wing” and further he observed that the assessee has taken accommodation entries from other entities based on which he has completed the issues making advantage on the basis of modified reasons during the assessment proceedings. He submitted that the reason recorded by the AO is factually incorrect and legally invalid. In this regard, he submitted that the entire foundation of the reopening was based on non-existent facts, i.e., receipt from Surender Kumar Jain or RKG Finvest Pvt. Ltd and once the factual premise is wrong, the reasons to believe cannot survive. He further submitted that the AO’s subsequent admission that she intended other names (Twinkle Mercantile Pvt. Ltd. and Shalini Holding Pvt. Ltd.) is a clear case of post-facto substitution and the law is well settled that reasons recorded cannot be changed, supplemented, or corrected later. In this regard, ld. AR relied on the 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 following judgments:  Mohinder Singh Gill v. Chief Election Commissioner (AIR 1978 SC 851)  Prashant S. Joshi v. ITO (324 ITR 154, Bombay HC)  Hindustan Lever Ltd. v. R.B. Wadekar (190 CTR 166, Bombay HC).

Hence, he submitted that the reassessment founded on incorrect reasons is void ab initio. Further with regard to reasons cannot be substituted or improved subsequently, he submitted that the AO’s explanation that “there was a typographical error” is untenable and the reasons recorded under Section 148 are jurisdictional facts, forming the sole basis for the assumption of power. He submitted that once recorded, they are immutable and the substitution of parties or the nature of transactions at the assessment stage amounts to a complete change of the basis and is contrary to law. Therefore, the entire proceedings stand vitiated for want of valid and subsisting reasons.

With regard to no addition can be sustained when based on incorrect reasons, ld. AR submitted that it is trite law that no addition can be made on an issue alien to the reasons recorded and the AO, having recorded reasons relating to Surender Kumar Jain and RKG Finvest Pvt. Ltd., could not have made additions with respect to Twinkle Mercantile Pvt. Ltd, Shalini Holding Pvt. Ltd., Lakshya Viniyog and share application money. Accordingly, he submitted that since the addition made pertains to entirely different parties and facts, it cannot be sustained. He further 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 submitted that even otherwise, no addition is warranted on merits as the alleged receipts from Twinkle Pvt. Ltd. and Shalini Pvt. Ltd. were business advances and not loan and the assessee produced confirmations, bank statements, and correspondence evidencing that these advances were received for a proposed business arrangement that did not fructify and were returned in the same financial year, leaving no balance outstanding as on 31.03.2011.Therefore, no income accrued or arose, nor any unexplained credit existed within the meaning of Section 68. This factual position is duly substantiated from the audited financials and reconciliation statements forming part of the Paper Book filed before the ITAT.

On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.

Considered the rival submissions and material placed on record. We observe that the case of the assessee was reopened by issue of notice under section 148 of the Act by recording the reasons as supplied by the Investigation Wing with the observation that the assessee has taken accommodation entry of Rs.30,00,000/- from Surendra Kumar Jain of M/s. RKG Finvest Pvt. Limited. After objections raised by the assessee, the AO in the assessment order agrees with the fact that the reasons recorded were a typographical mistake and he proceeded to complete the 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 assessment with the new reasons which were not the reasons recorded for reopening of the case. After considering the facts on record, we observe that the reasons cannot be substituted or improvised during the assessment proceedings. The AO gets the jurisdiction to reopen the assessment mainly on the basis of reasons recorded and subsequent approval of the competent authority to initiate the proceedings. We observe that the AO has taken the approval from Pr.CIT with the information received from the Investigation Wing which was wrong. The AO has not verified the reason forwarded by the Investigation Wing and proceeded to initiate the proceedings with the wrong reasons. The AO completed the assessment with the new issue and with the new reasons that assessee has taken loans from Twinkle Mercantile Pvt. Ltd. and Shalini Holding Pvt. Ltd.. Since the initiation of proceedings is void ab initio, the assessment completed u/s 147 is also bad in law. In the result, the assessment order is set aside. Accordingly, the cross objections for AY 2011-12 filed by the assessee is allowed.

Since the cross objections filed by the assessee is allowed, the Department’s appeal for AY 2011-12 is also dismissed as infructuous.

Ld. AR further placed reliance on orders rendered by the by jurisdictional High Court in the case of IBIBO Group Private Limited v. ACIT, Circle 10 (1) & Anr., W.P.(C) 17639/2022 at Page Nos. 1-3 of the case law compilation and Make My Trip India Private Limited v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi &Anr.’ At Page Nos. 13-18 of the case law compilation, wherein Hon’ble High Court had quashed the re-assessment proceedings on the basis of the concession of the Revenue in the case of Rajeev Bansal (Supra). In this regard, he brought to our notice relevant paragraph of the order in the case of Make My Trip India Private Limited v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi &Anr. which is reproduced below:

Ld. AR further submitted that it is pertinent to mention that in the case of Income Tax Officer Ward 1(2) Jaipur v. R.K. Build Creation Pvt Ltd: Special Leave Petition (Civil) Diary No. 59625/2024 at Page Nos 7-8 of the case law compilation, the Hon’ble Supreme Court had dismissed the SLP arising from a similar decision rendered by the Hon’ble Rajasthan High Court in DBCWP No.14414/2022 and the . The said order is set out below :- “Delay condoned.

Further he placed reliance on various judgements rendered by Hon’ble High Courts and Tribunal as stated below: a. Pratishtha Garg v. ACIT, Central Circle 25 Delhi (Delhi High Court) at Page Nos. 4-6of the case law compilation. b. Income Tax Officer, Ward-62(1), New Delhi v. Girish Kumar Gupta (ITAT- Delhi) at Page Nos. 80-89of the case law compilation. c. Assistant Commissioner of Income Tax Circle 19 (1) & Ors. V Nehal Ashit Shah (Supreme Court) at Page Nos. 19-21of the case law compilation.

On the other hand, ld. DR of the Revenue relied on the AO’s report.

Since the cross objections filed by the assessee is allowed, the Department’s appeal for AY 2015-16 is also dismissed as infructuous.

We observe that the present appeal is filed by Revenue assailing the order dated 07.08.2024 passed by National Faceless Appeal Centre (‘NFAC’) under Section 250 of the Income Tax, 1961 (‘the Act’) for AY 2016-17 in the case of the assessee and the Assessee had filed cross objection also. Ld. CIT (A) vide order dated 07.08.2024 passed under Section 250 of the Act decided the appeal in the favour of the assessee on merits. Further, we 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 2016-17 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 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]’.

In this regard, we observe that the notice dated 30.06.2021 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 under Section 151 of the Act, it has been provided that no notice under Section 148 of the Act shall be issued unless the AO has obtained prior approval of the specified authority to issue such notice and the specified authority for the purpose of this section has been defined in Section 151 of the Act. Section 151 of the Act which deals with the sanction of the specified authority for the issue of notice states specified authority for the purposes of section 148 and section 148A will be Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. For the sake of clarity, section 151 of the Act is reproduced below:

Further we observe that since more than 3 years have elapsed while issuing notice for the year under consideration, i.e., AY 2016-17, 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. From the bare perusal of the notice dated 30.06.2021 under Section 148 of the Act, we observe that it is apparent that the AO ought to have taken the approval from PCCIT when more than 3 years had already elapsed from the end of the assessment year, hence, the alleged approval is erroneous, illegal, and bad in law. 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.

Further we observe that in the present case, the reopening notice under section 148 pertains to AY 2016-17 viz. more than 3 years have elapsed 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 from the end of the Assessment Year. Thus, the Assessing Officer was required to obtain the prior sanction of either the 'Principal Chief Commissioner' or 'Principal Director General'. However, we observe that in the facts of the present case, the approval has been obtained from the PCIT-4, Delhi. 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. In this regard, we find force from the decisions of Communist Party of India (Marxist) v. Income Tax Department [2025] 174 taxmann.com 925 (Delhi), wherein the Hon’ble Delhi High Court had referred to the earlier decisions including the decision rendered by the Bombay High Court in J M Financial & Investments Consultancy Services (P.) Ltd. v. ACIT [W.P. No. 1050 of 2020]; Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 457 ITR 647 (Bom) and Vidyadhar Shetty v. Income Tax Officer, Ward 28(1)(1), Mumbai & Ors. [W.P. No. 10849 of 2024]; the Madras 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 High Court in Ramachandran Shivan v. ITO [W.P. No.8570 of 2023] and the Orissa High Court in Ambika Iron and Steel (P.) Ltd. v. Pr. CIT [2023] 452 ITR 285 (Ori.) and had 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 relevant Assessment Year is AY 2016-17, and notice is issued beyond 3 years, hence, the approval from PCIT-4, Delhi is illegal 4670 & 4671/DEL/2024 CO Nos.126, 104 & 105/Del/2025 and bad in law. Thus, 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. Accordingly, the cross objections for AY 2016-17 filed by the assessee is allowed.

Since the cross objections filed by the assessee is allowed, the Department’s appeal for AY 2016-17 is also dismissed as infructuous.

To sum up : all the cross objections filed by the assessee are allowed and the appeals filed by the Revenue are dismissed.