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Judgment
PER AMITABH SHUKLA, AM,
This appeal filed by the assessee is against order dated 11.08.2025 of learned Commissioner of Income Tax (Appeals)-30, New Delhi, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 29.03.2025 passed under section 1437 of the Income Tax Act, 1961 pertaining to Assessment Year 2021-22. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the basis of facts and circumstances of the case, order passed by the learned Commissioner of Income Tax (Appeals) ["CIT(A)"], is bad both in the eye of law and on facts.
2.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in passing the order despite the fact that the impugned assessment order passed without proper approval u/s 148B of the Income Tax Act, 1961 is invalid and void-ab-initio.
3.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in passing the order despite the fact that the assessing officer has grossly erred in issuing notice u/s 148 without there being any case of income escaping assessment. (il)
That the learned CIT(A) has erred in confirming the additions made by AO in absence of any incriminating or tangible material found from search u/s 132, the assumption of jurisdiction u/s 147/148 is without application of mind and same is illegal and void-ab-initio.
(i)That the notice u/s 148 without proper approval u/s 151 is invalid and bad in law.
4.(i) On the facts and circumstances of the case the Learned CIT(A), has erred both on facts and in law in confirming the addition of Rs.71,07,078/- made by the AO on account of long term capital gain on transfer of shares under section 45 read with section 50CA of the Income Tax Act 1961.
(ii)That the learned CIT(A) has erred in confirming the action of AO in re-computing the sale value of shares by adopting the FMV as on 30.03.2021 without appreciating the fact that FMV of shares during the period FY 2016-2017 must be considered since the transfer relates back to the said period.
(iii)That the abovesaid addition has been confirmed by rejecting the contention of the assessee that provisions of Section 50CA has no applicability to the facts of the case of the assessee, as the Section 50CA was not in force in F.Y. 2016-17 when the transaction was conceived and sale consideration was agreed
(iv)That the abovesaid addition has been confirmed by rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard
On the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the contention of the assessee that the abovesaid transactions are purely in the nature of family arrangement and not chargeable to tax under the Income Tax Act.
It is seen from the above grounds of appeal that the assessee has challenged the order under section 143(3) r.w.s. 147 dated 29.03.2025, which was confirmed by the order of ld. CIT(A) under section 250 vide order dated 11.08.2025 raising both legal grounds as well as on merits of the addition. As the legal ground strikes at the very root of the assessment order challenging the validity of assessment proceedings, we have decided to address the same first. Through the ground of appeal no.3, the assessee has submitted that the notice issued under section 148 dated 20.09.2023 was invalid. Explaining the brief factual matrix, it was explained that Return of Income under section 139(1) declaring income of Rs.3,88,380/-was filed on 22.12.2021 which was processed under section 143(1) of the Act on 20.03.2022 accepting the returned income. Thereafter, assessment proceedings under section 147 were initiated through issue of notice under section 148 dated 20.09.2023. The ld. AO had reopened the case on the basis of following reasons recorded through his note dated 10.01.2023, which were approved by the PCIT on 13.09.2023. Relevant extracts of the approval documents have been filed by the ld. Counsel for the assessee through its voluminous paper book.
“…..1. Brief facts of the case:
A search and seizure action u/s 132 of the Act was conducted in Goyal Gases group of cases on 10.01.2023 and warrant was executed in the name of M/s Gas Supply Co Pt. Ltd. at A-127, Sector-47, Noida, GB Nagar, Uttar Pradesh-201301. Copy of Panchnama placed on record.
1.1Subsequently, the Chief Commissioner of Income-tax, (Central)-2, New Delhi accorded administrative approval for centralization of the case of M/s Gas Supply Co Put. Ltd. with the office of the undersigned and the same was conveyed vide letter bearing F.No. CCIT(C)-2/Del/CC2-44/2022-23/490 dated 21.02.2023. Thereafter, the CCIT (Central)-2, Delhi transferred jurisdiction over the case under consideration from Ward-10(I), Delhi to the office of the undersigned by passing order u/s 127 of the Act vide DIN & Order No: ITBA/COM/F/17/2022-23/1050846496(1) dated 16.03.2023. Thus, the undersigned has jurisdiction over the case under consideration.
2. Information suggesting escapement of income:
In this regard, it is pertinent to mention here that Section 148 of the Act mandates that there should be information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year, before issuance of notice u/s 148 of the Act. Further, Explanation 2 of Section 148 states that where a search is initiated u/s 132 on or after the 1st day of April, 2021, in the case of the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee.
In view of the facts and legal position stated supra, the Assessing Officer is deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant year, as search was conducted in the case of the assessee on 10.01.2023 i.e. after
3. Procedure laid down in Section 148A
In this regard, kind reference is invited to proviso to Section 148A which states that the provisions of this section shall not apply in a case where a search is initiated u/s 132 in the case of the assessee on or after the 1" day of April, 2021. Further, the Board has also clarified in the guidelines for issuance of notice u/s 148 that procedure mentioned in section 148A is not required to be followed in the cases where search has been conducted on the assessee.
3.1In view of the facts as stated supra and the position of law, the provisions of Section 148A of the Act does not apply in the instant case, as search action u/s 132 of the Act was conducted in the case of the assessee on 10.01.2023 i.e. after 01.04.2021.
4. Time limit for notice u/s 148:
In this regard, it is imperative to refer to the provisions of Section 149 which states as under:
(1)No notice under section 148 shall be issued for the relevant assessment year,-
(a)if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
4.1It may be stated here that the relevant assessment year under consideration is 2021-22, which is covered by clause (a) of sub-section (1) of section 149, as three years have not elapsed from the end of the relevant assessment year. Hence, notice u/s 148 may be issued in the case as mandated by sub-section (1) of section 149 of the Act.
4.2In view of the above stated facts and legal position, it is a fit case for issuance of notice u/s 148.
5. Specified authority:
In this regard, kind reference is invited to provisions of Section 151 of the Act, which states that specified authority for the purposes of section 148 shall be Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year.
5.1In the instant case, three years have not elapsed from the end of the relevant assessment year, being 2021-22. Thus, notice u/s 148 of the Act may be issued with the prior approval of the Pr.CIT(Central)-3, New Delhi….”
The appellant assessee in response thereof the assessee filed its Return of Income on 10.10.2023 reiterating its original income of Rs.3,88,380/-. The ld. AO based upon impugned additions and by recording his reasons passed his order making an addition of Rs.71,07,078/-. The ld. AO made the addition making reference to statement of Shri Suresh Chand Goyal.
We have heard rival submissions in the light of material placed on record. The principal argument qua the issue of impermissibility or invalidity of notice under section 148 raised by the appellant assessee is that the ld. AO had assumed invalid jurisdiction. It was vehemently argued that explanation-2 to section 148 mandates availability of incriminating material with the AO before initiation of 148 proceedings. The ld. Counsel submitted that the notice issued under Section 148 of the Income-tax Act, 1961 ("the Act") for Assessment Year 2021-22 is without jurisdiction and liable to be quashed, as the mandatory jurisdictional conditions for initiating reassessment proceedings have not been satisfied. It was submitted that for the year under consideration, the Return of Income ("ROI") was filed on 22.12.2021, which was processed under Section 143(1) on 20.03.2022. The time limit for selection of the return for scrutiny expired on 30.06.2022. Accordingly, the assessment for the aforesaid assessment year had attained finality on the date of search conducted upon the assessee on 10.01.2023. Reliance in this regard was placed on the case of Chintels India Ltd. vs. Deputy Commissioner of Income-tax, Circle 8[2017] 84 taxmann.com 57 (Delhi). The ld. Counsel for the assessee argued that considering the present reassessment under Section 147 was initiated for closed/unabated AY, the scope of said assessment is to be restricted to undisclosed income emanating from incriminating material found during the search. In this regard, heavy reliance was made to the Hon ble Supreme Court judgment in the case of Abhisar Buildwell Pot. Ltd. (454 ITR 212). It was submitted that the said decision has been followed by this Tribunal in its several decisions including in the case of DCIT v. Malhotra Cables Pot. Ltd.[ITA No. 1317/Del/2025]. The ld. Counsel further submitted that therefore, the present reassessment proceedings were neither initiated nor completed on basis of incriminating material available on records. It was vehemently stressed that the reassessment proceedings were initiated on the basis of a review of documents, i.e., financial statements and the ROI, dehors any incriminating material found during the course of the search. The ld. Counsel submitted that the impugned satisfaction note (supra) lacked any reference to any incriminating material. The reasons merely stated that since a search was conducted in the case of the assessee, the case was considered fit for initiation of reassessment proceedings.
Per Contra, the ld. DR placed reliance upon the orders of lower authorities.
The position of law qua reopening of assessment under section 148 in cases of close assessment is very clear now. Hon’ble Apex Court in its ruling in the case of Abhisar Buildwell 454 ITR 212(SC) and which has been followed in a plethora of cases has unequivocally held that in the cases of completed assessments, proceedings under section 148 can only be initiated on the basis of incriminating material found during the course of search. This position has been reiterated by several Hon’ble High Courts as well as Tribunal Benches across the country. When viewed in the above background, we have noted that the reasons recorded by the ld. AO extracted (supra) do not indicate anywhere of any mention that the proceedings under section 148 were being initiated qua any incriminating material found during the course of search. Thus, the primary condition has not been satisfied. The notice under section 148 is therefore untenable and deserves to be quashed. It is trite law that when the foundation of an assessment order being a notice is invalid, the consequent assessment order would also not survive. The Revenue could not controvert the arguments of the appellant assessee on this issue. In the present facts and circumstances, we quash the notice under section 148 dated 10.10.2023 and the corresponding assessment order dated 29.03.2025. The ground of appeal no.3 raised by the assessee qua invalid assumption of jurisdiction is therefore allowed.
As the assessee has succeeded qua the legal ground of appeal no.3 all other grounds of appeal raised by the assessee on the merits of the case, etc. have become academic in nature.
In the result, the appeal of the assessee is allowed.