UPNEET SINGH ARNEJA,GURGAON vs. ITO WARD 45(1), NEW DELHI

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ITA 1100/DEL/2025Status: DisposedITAT Delhi27 August 2025AY 2016-178 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal on the legal ground concerning the validity of the reassessment proceedings. The Tribunal noted that the notice under section 148A(b) was issued on 18.05.2022 and the order under section 148A(d) on 28.07.2022 for AY 2016-17. Since more than three years had elapsed from the end of the relevant assessment year, the approval for issuing the notice under section 148 should have been obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, as per section 151(ii) of the Act. However, the approval was obtained only from the Pr. Commissioner of Income Tax, which was not the competent authority. The Tribunal respectfully followed the decisions of the Hon'ble Jurisdictional High Court in Communist Party of India (Maxist) V. CIT(Ex) and the Co-ordinate Bench in Sampark Management Consultancy LLP v. DCIT, which held that such approval is not sustainable under law. Consequently, the assessment order dated 20.04.2023 was quashed. The other grounds raised by the assessee were rendered academic and were kept open for adjudication. The operative direction was to allow the appeal.

What were the facts?

The assessee, Upneet Singh Arneja, filed an appeal against the order of the CIT(A)/NFAC for Assessment Year (AY) 2016-17. The original assessment order was passed by the Assessing Officer (AO) on 20.04.2023 under section 147 read with sections 144 and 144B of the Income-tax Act, 1961. The assessee had initially filed a return on 17.10.2016, which was declared invalid by CPC. A revised return was filed on 16.04.2018 without condonation of delay, declaring an income of Rs. 4,43,800/- and a turnover of Rs. 2,95,86,240/-. No tax audit report was filed. During search proceedings on Shri Atul Tyagi, it was revealed that he deposited Rs. 229 crores during demonetization and acted as an entry provider, using the assessee's bank account. A notice under section 148 was issued on 18.05.2021. Subsequently, a show cause notice under section 148A(b) was issued. The AO completed the assessment by making an addition of Rs. 94,85,865/- under section 68. The CIT(A) dismissed the assessee's appeal.

What were the issues?

1. Whether the reassessment proceedings initiated under section 147 read with section 148A and 148 of the Act for AY 2016-17 are valid, considering the approval obtained for issuing notice under section 148. 2. Whether the addition of Rs. 94,85,865/- made by the AO under section 68 is sustainable. Assessee's Contentions: - The reassessment proceedings are bad in law and on facts due to violations of statutory conditions and prescribed procedures. - The approval for initiating reassessment was not obtained from the competent authority as mandated under section 151(ii) of the Act. Specifically, for AY 2016-17, the notice under section 148A(b) was issued on 18.05.2022 and the order under section 148A(d) on 28.07.2022. Since more than three years had lapsed from the end of AY 2016-17, approval from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General was required, but approval was obtained only from the Pr. Commissioner of Income Tax. - Reliance was placed on the decisions in Communist Party of India (Maxist) V. CIT(Ex) and Sampark Management Consultancy LLP v. DCIT. - The addition was confirmed arbitrarily, rejecting material and evidence, and without providing an opportunity to cross-examine the person on whose statement allegations were made, violating principles of natural justice. Revenue's Contentions: - The notice/order was issued after taking prior approval from the authority as per the directions of the Hon'ble Supreme Court in the case of Ashish Agarwal.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 144B,Section 148,Section 148A,Section 148A(b),Section 148A(d),Section 68,Section 151,Section 151(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “E”, DELHI

Before: SH. S. RIFAUR RAHMAN & SH. SUDHIR KUMAR

For Appellant: Ms. Rano Jain, Advocate
Hearing: 13/08/2025Pronounced: 27/08/2025

Date of hearing: 13/08/2025 Date of Pronouncement: 27/08/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] vide order dated 12.02.2025 pertaining to A.Y. 2016-17 arising out the assessment order dated 20.04.2023 u/s.147 r.w.s 144 read with section 144B of the Income-tax Act, 1961, (in short ‘the Act’).

2.

The assessee has raised the following grounds in appeal:

1.

On the facts and circumstances of the case, the order passed by the National Faceless Appeal Centre (NFAC) is bad both in the eye of law and on facts.

2. On the facts and circumstances of the case, NFAC has erred both on facts and in law in confirming the order passed by the A.O., despite the same being initiated in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed.

3.

On the facts and circumstances of the case, NFAC has erred both on facts and in law in confirming the order passed by the A.O., despite the same being initiated without proper approval as mandated under section 151(ii) of the Act. 4. On the facts and circumstances of the case, the NFAC has erred both on facts & in law in confirming the addition of an amount of Rs. 94,85,865/- made by Assessing Officer. 5. On the facts and circumstances of the case NFAC has erred both on facts and in law in substituting the new sections as against the one invoked by the Assessing Officer, without giving assessee an opportunity of being heard. 6. On the facts and circumstances of the case, the NFAC has erred both on facts & in láw in confirming the said addition arbitrarily rejecting the material and evidences brought on record by the assessee to prove the transaction in question.

7. On the facts and circumstances of the case, NFAC has erred both on facts and in law in confirming the action of the AO despite the law that no adverse inference can be drawn against the assessee on the basis of material collected at the back of him, without giving an opportunity to rebut the same, in violation of principle of natural justice.

8. On the facts and circumstances of the case, the NFAC has erred both on facts and in law in confirming the action of the AO despite the law that the addition is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice.

9.

The appellant craves leave to add, amend or alter any of the grounds of appeal.

3. The brief facts of the case are that the assessee is an individual. The assessee, prop. of M/s. Kanika Herbals has e-filed his return of income for the AY 2016-17 on 17.10.2016 declaring total income of Rs.4,43,800/- and the same was declared invalid by the CPC. Later on, it is seen that the assessee has furnished ITR for the year under consideration on 16.04.2018 without condonation of delay where income of Rs.4,43,800/- and turnover of Rs.2,95,86,240/- was declared. The assessee has not filed the form 3CA/3CD Tax audit report for the year under consideration despite the fact that turnover of Rs.2,95,86,240/- was declared. During the search proceedings on Shri Atul Tyagi, it was found that the Shri Atul Tyagi has deposited the Rs.229 crores in various banks accounts during the demonization period. Shri Atul Tyagi accepted in his statement that he has been working as entry provider and he used his various bank accounts for this purpose and also used the account of the assessee. Notice u/s 148 of the Act was issued on 18-05-2021. Further in the compliance of the Hon’ble Supreme court order show cause notice u/s 148A(b) of the Act was issued. After considering the reply submitted by the assessee the Assessing Officer completed the assessment after making the addition of Rs. 94,85,865/- under section 68 of the Act.

4. Aggrieved by the order of the AO the assessee filed the appeal before the Ld. CIT(A), who vide his order dated 12- 02-2025 dismissed the appeal. Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before the Tribunal.

5. Ld. Counsel for the assessee has raised the legal ground no.6 and stated that first notice u/s 148 was issued on 28- 05-2021for the A.Y. 2016-17 under the old reassessment 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 27.05.2022 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.”

6.

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 Co- ordinate Bench we allowed the appeal of the assessee and quashed the assessment order dated 20-04-2023.

7.

We allowed the appeal of the assessee on legal ground the other grounds have become academic and keep them open for adjudication.

8.

In the result the appeal of the assessee is allowed.

Order pronounced in the open court on 27.08.2025.

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