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Judgment
PER NAVEEN CHANDRA [ACCOUNTANT MEMBER]:
The above-captioned appeals are preferred by the assessee against the order dated 30.01.2026, passed by the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘ld. CIT(A)/NFAC’) under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), arising out of the following respective orders:
Assessment Year 2013-14: NaFAC order dated 27.03.2022 under Section 147 r.w.s 144B of the Act.
Assessment Year 2015-16: NaFAC order dated 28.03.2022 under Section 147 r.w.s 144B of the Act.
Although the facts and issues in the above-captioned appeals are distinct, both appeals are being disposed of by this common order for the sake of convenience and brevity.
The grounds of appeal raised by the assessee in ITA No.3432/Del/2026 for AY 2013-14 are as under:
1.That the approval granted under section 151A of the Act is bad in law and void ab initio, as the reasons recorded for such approval do not pertain to the appellant and are based on incorrect and irrelevant facts, thereby vitiating the entire proceedings, being a case of non-application of mind.
2.That the Ld. CIT(A) has erred in law and on facts in upholding the addition made by the Ld. AO, which is based on borrowed satisfaction and without independent verification of information to establish a live nexus with the appellant, thereby vitiating the entire reassessment proceedings.
3.That the Ld. CIT(A) erred in law and on facts in adjudicating the appeal for AY 2013-14 by placing reliance on the remand report of the Ld. AO pertaining to AY 2015-16, which is wholly irrelevant and not applicable to the facts of the year under consideration, thereby vitiating the impugned order.
4.That the Ld. CIT(A) erred in law and on facts in upholding the addition made by the Ld. AO under section 69A of the Act, despite the fact that the said amount was duly recorded in the books of account and the relevant details were furnished during the course of assessment proceedings.
5.That the Ld. CIT(A) erred in upholding the addition made by Ld. AO of Rs 24,46,27,700/- being amount deposited in cash in the Bank A/c treating the same as alleged unexplained cash credit u/s 69A r.w.s. 115BBE of the Act made by the appellant.
6.That the Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 1,64,53,725/- made by the Ld. AO, being 2 percent of Rs. 82,26,86,246/- representing the amount credited in the bank A/c other than cash deposits, on account of alleged commission income presumed to have been earned by the appellant for providing accommodation entries, without bringing any independent evidence on record, merely on surmises and conjectures.
7.That the Ld. CIT(A) has erred in law and on facts in determining the amount in the impugned order at a figure higher than that mentioned in the Show Cause Notice, without providing any proper justification or affording a reasonable and adequate opportunity of being heard to the appellant, thereby violating the principles of natural justice.
8.That the Appellant craves leave to add, delete or amend the grounds of appeal before the disposal of the present Appeal.
Brief facts of the case are that assessee was engaged in the business of trading of food and grains etc. The AO had information that the assessee has deposited cash of Rs.33,26,13,731/- with a banking company, deposited cash of Rs.24,28,65,940/- in a saving bank account & did cash transaction of Rs.21,57,15,000/- totaling to Rs.79,11,94,671/- during the financial year 2012-13 relevant to the assessment year 2013-14.
The assessee had not filed any return hence, her case was reopened under section 148 of the Act. She filed her income tax return for A.Y. 2013-14 under section 148 declaring a total income of Rs.1,98,650 on 23.02.2022. In the course of assessment proceedings, the assessee stated that her husband Sh. Vipin Garg was watching the business and that the total turnover for the year was Rs. 1,05,16,76,695/- and her total income was Rs. 2,43,525/-. Her husband is in imprisonment so she could not file the reply timely and submitted copy of Balance Sheet, Profit and Loss account and bank statement.
The AO found from perusal of her bank account statement, that there was cash deposit amounting to Rs. 24,46,27,700/- and in absence of assessee’s response, added the cash credit amounting to Rs. 24,46,27,700/- as unexplained cash credit u/s 69A r. w. s. 115BBE of the Income Tax Act, 1961. In addition, the AO found that there is deposit in bank account, other than cash deposit, amounting Rs.82,26,86,246/. The assessing officer considered them as accommodation entries and made addition @2% as commission received for accommodation entries, amounting Rs. 1,64,53,725/-.
Aggrieved, assessee was in appeal before the ld. CIT(A) who dismissed the appeal of the assessee. Aggrieved, assessee is now in appeal before us.
Before us, ld. Counsel for the assessee raised the first and foremost objection to the reassessment made by the AO is that approval under section 151 of the Act is mechanical and based on incorrect facts. The ld AR stated that the case was reopened under section 148 of the Act vide notice dated 28.03.2021 wherein approval was granted under section 151 of the Act, records the name of assessee ‘Raj Kumar’, whereas the assessee is a different person. The ld AR relied on the following case laws for the proposition that Reopening based on Incorrect and changing foundation is unsustainable:
Anuradha v. ITO [(2026) (2026) 186 taxmann.com 383 (Amritsar - Trib.)]
PCIT v. N.C. Cables Ltd. [(2017)88 taxmann.com 649 (Delhi)]
CIT-7 V. Pioneer Town Planners (P.) Ltd.[2024] 160 taxmann.com 652
PCIT vs. Meenakshi Overseas (P.) Ltd.[2017] 395 ITR 677
Metro Decorative Pvt. Ltd. v. ITO ITA No. 450/Del/2014
Sabh Infrastructure Ltd. v. ACIT W.P.(C) 1357/2016
The ld AR further argued that during the course of reassessment proceedings, the Ld. AO issued a Show Cause Notice dated 17.03.2022 proposing an addition of Rs. 8,41,34,136/- by estimating the appellant's income under section 44AD of the Act. However, the Ld. AO passed the assessment order dated 27.03.2022 under section 147 read with section 144B of the Act. Instead of making the addition proposed in the Show Cause Notice, the Ld. AO made additions of Rs. 24,46,27,700/- under section 69A read with section 115BBE and Rs. 1,64,53,735/- on account of alleged commission income, thereby assessing the total income at Rs. 26,10,81,435/-.
Per contra, the ld. DR on the other hand relied on the order of the AO/CIT(A).
We have heard the rival submissions and perused the material available on record. We address the first and foremost objection of the assessee that the approval under section 151 was invalid. We find from the Proforma for recording reasons for reopening of assessment u/s 148 and for obtaining approval from PCIT, mentions Annexure–‘A’ which contains reasons recorded for reopening assessment u/s 148 of the Act. We find from the said ‘Annexure A’, reasons recorded for reopening of the assessment is in the name of “Raj Kumar, C/o M/s. Bala Ji Enterprise, Old Jhajjar Road, for the A.Y. 2013-14 under section 147 of the Act”. It is recorded in the reasons that assessee Raj Kumar C/o M/s. Bala Ji Enterprise, Old Jhajjar Near Star Hotel, Charkhi Dadri. had entered into financial transaction of Rs.33.26 crore in AY 2013-14 in the nature of depositing in cash and cash transaction.
It is therefore unrebutted fact that the reasons recorded for reopening is under the name of “Raj Kumar” whereas the assessee is Deepti Garg and the approval granted u/s 151 is based on incorrect facts. In such facts and circumstances, we place reliance the decision of the coordinate bench of ITAT, Amritsar Bench in the case of Anuradha v. Income-tax Officer (2026) 186 taxmann.com 383 (Amritsar Trib.)]. The Tribunal, after placing reliance upon the judgment of the Hon'ble Delhi High Court in Principal Commissioner of Income-tax v. N.C. Cables Ltd. [(2017) 88 taxmann.com 649 (Delhi)), held that where the reasons recorded by the Assessing Officer are factually incorrect, based on erroneous figures and demonstrate lack of independent application of mind, the very assumption of jurisdiction under section 147 is vitiated. The Hon'ble Tribunal observed as under:
"As such considering the law laid down by various High Courts on this issue, we have no hesitation in holding that in the instant case before us, there has been no application of mind by the AO while recording the reasons which are factually incorrect and based on wrong figures and subsequently, the approval granted by higher authorities are also mechanical in nature without any application of mind to the materials on record, and as such the initiation of proceedings by issue of notice u/s 148 itself is legally invalid rendering the entire proceedings void ab initio."
In view of the facts and circumstances of the instant case, we are of the considered view that as the reasons was recorded for reopening in the name of “Raj Kumar”, the reopening itself is vitiated, rendering the notice issued under section 148 invalid, illegal and without jurisdiction. Further, the approval granted by the higher authority under section 151 is rendered mere mechanical and does not reflect due consideration of the material on record. Consequently, the notice u/s 148 and the consequent reassessment proceedings is held as void ab initio and quashed. The ground is allowed in aforesaid terms.
The grounds of appeal raised by the assessee in ITA No.3433/Del/2026 for AY 2015-16 are as under:
1.“That the reopening of assessment under section 147 read with section 148 of the Act is bad in law, inasmuch as the information pertaining to the appellant has been collected from a search conducted under section 132 of the Act in the case of a person other than the assessee, namely Vipin Kumar, and therefore, the provisions of section 153C of the Act ought to have been invoked instead of resorting to section 147/148 of the Act.
2.That the Ld. CIT(A) has erred in law and on facts in upholding the addition made by the Ld. AO, which is based on borrowed satisfaction and without independent verification of information to establish a live nexus with the appellant, thereby vitiating the entire reassessment proceedings.
3.That the Ld. CIT(A) erred in law and on facts in upholding the addition made by the Ld. AO under section 69A of the Act, despite the fact that the said amount was duly recorded in the books of account and the relevant details were furnished during the course of assessment proceedings.
4.That the Ld. CIT(A) erred in upholding the addition made by Ld. AO of Rs 6,19,60,950/- being amount deposited in cash in the Bank A/c treating the same as alleged unexplained cash credit u/s 69A r.w.s. 115BBE of the Act made by the appellant.
5.That the Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 30,22,703/- made by the Ld. AO, being 2 percent of Rs. 15,11,35,153/- representing the amount credited in the bank A/c other than cash deposits, on account of alleged commission income presumed to have been earned by the appellant for providing accommodation entries, without bringing any independent evidence on record, merely on surmises and conjectures.
6.That the Ld. CIT(A) has erred in law and on facts in determining the amount in the impugned order at a figure higher than that mentioned in the Show Cause Notice, without providing any proper justification or affording a reasonable and adequate opportunity of being heard to the appellant, thereby violating the principles of natural justice.
7.That the Appellant craves leave to add, delete or amend the grounds of appeal before the disposal of the present Appeal.”
With respect to A.Y. 2015-16, the ld. Counsel for the assessee stated that the assessment was reopened on the basis of information from the Investigation Wing that the assessee had received accommodation entries of Rs.56,64,000/- from the Shri Vipin Garg. The ld AR further stated that during the course of reassessment proceedings, the Ld. AO issued a Show Cause Notice dated 17.03.2022, wherein the AO proposed an addition of Rs. 2,26,51,688/- by estimating the assessee's income under section 44AD of the Act. The ld AR stated that significantly, the Ld. AO, at this stage, did not propose any addition on account of the alleged accommodation entry of Rs. 56,64,000/-. The AR further submitted that while passing the assessment order dated 27.03.2022 under section 147 read with section 144B of the Act, the Ld. AO once again changed the very basis of the proceedings. The proposed addition under section 44AD was completely abandoned, and for the first time the Ld. AO treated cash deposits in the assessee's bank account amounting to Rs. 6,19,60,950/- as unexplained under section 69A read with section 115BBE of the Act. The Ld. AO further made an addition of Rs. 30,22,703/- on account of alleged commission income on bank credits other than cash deposits. The ld. Counsel for the assessee vehemently argued that the reassessment proceedings commenced with an allegation of accommodation entries of Rs.56,64,000/- but addition was made on account of cash deposit in the bank account in the assessment order. The assessee relied upon the decision of Bombay High Court in the case of CIT vs. Jet Airways (I.) Ltd. [2010] 195 Taxman 117 (Bombay) and Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT [2011] 12 taxmann.com 74 (Delhi) to argue that the reasons for reopening the assessment and addition made in the reassessment order should be same.
Per contra, ld. DR relied on the order of the CIT(A)/AO.
We have heard the rival submissions and perused the material available on record. The assessee’s averment that in A.Y. 2015-16, the AO has reopened the assessment on reason of accommodation entries but ultimately added the amount on another reason of cash deposit in bank, has gone unrebutted from the Revenue. In such factual matrix, the legal mandate enumerated by the decision of Jet Airways (I.) Ltd. and Ranbaxy Laboratories Ltd. (supra) do not permit the assumption of jurisdiction u/s 148 of the Act. In the instant case, no addition is made on the issue forming the basis of original reasons recorded, and therefore, the assessing officer loses the jurisdiction to make addition on other independent issue without issuing a fresh notice u/s 148 of the Act. We therefore hold in such facts and circumstances, the entire reassessment proceedings as being without a valid jurisdiction and is liable to be quashed. We accordingly, quash the notice u/s 148 as well as the consequent reassessment order. Grounds are disposed off in aforesaid terms.
In the result, both the appeals in ITA Nos. 3432 and 3433/Del/2026 of the assessee are allowed.