GPA Capital Foods Private Limited vs DCIT

PER MADHUMITA ROY, J. M.:

The captioned appeals filed by the assessee and the Revenue are directed against the different orders passed by the Ld. Commissioner of Income-tax (Appeals)-29, New Delhi [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Orders passed by the Assessment Unit, Income-tax Department (hereinafter referred to as ‘the ld. AO’) under Section 147 of the Income Tax Act, 1991 (‘Act’ for short) for Assessment Year 2017-18 and 2018-19 respectively.

The Assessee has challenged the initiation of reassessment proceeding as invalid and without jurisdictionaland further that without compliance with the legal requirements of the provision of Section 147/148//148A/151/149 and Explanation 2 of Section 148 of the Act. The Assessee in the year under consideration on the basis of information received in relation to a search conducted under Section 132 of the Act dated 17.11.2021 on Galaxy Group Sh. Pradeep Indra Prasad Agrawal and entry providers of Sh. Deepak Agarwal and Sh. Himanshu Verma by the Investigating Wing that the Assessee had entered into the transactions with one M/s CEA Consultants P. Ltd. amounting to Rs. 1,91,95,250/- during the year under considerationis a paper company controlled and managed by Deepak Agarwal and Himanshu Verma felicitating accommodation entries, notice under Section 148 of the Act was issued on the Assessee namely GPA Capital Foods Pvt. Ltd, having PAN No. AAJCA1956A, the Assessee before us. The said notice under Section 148 dated 27.03.2024 mentioned accommodation entries obtained by the Assessee in the form of receipts/payments to the tune of Rs. 2,50,00,000/- from the entities controlled as above. Such notice was issued upon approval Explanation 2 of Section 148 of the Assessee from the CCIT, prior approval and approval of the specified authority in the light of Section 151(ii) of the Act.

The Ld. Counsel appearing for the Assessee Mr. S. K. Gupta, has drawn our attention to page Nos. 66 to 68 of the Paper Book filedbefore us containing the said notice dated 27/03/2024 issued under Section 148 of the Act for reopening of assessment against the Assessee .Relying on this particular notice it was submitted by the Ld. Counsel that the foundational reason for reopening of assessment is the loan transaction of another entity namely M/s GPA Food Private Limited having PAN No. AAECG2324G to the tune of Rs. 2,50,00,000/- and on the returned income shown by the Assessee therein at Rs. 5,30,50,600/- filed on 29/01/2018, whereas the return filed by the Assessee before us of Rs. 3,00,74,890/- and it was filed on 22.09.2018 appearing at the very first paragraph of the assessment order dated 20.03.2021 appearing at Page 55 of the Paper Book filed before us having different PAN. Such original assessment was done under Section 143(3) r.w. Section 143(3A) and 143(3B) of the Act dated 20.03.2021. Thus, it is evident that the loan transaction referred by the Ld. A.O. in reopening of assessment is not the Assessee namely M/s GPA Capital Foods Pvt. Ltd. having PAN No. AAJCA1965A who has filed its return on 22.09.2018 of an income declaring an income of Rs. 3,00,74,890/-. The loan transaction in question is on a company being GPA Food Private Limited, PAN No. AAECG2324G declaring return of income on 29.01.2018 at Rs. 5,30,50,600/- and therefore, the entire recording of reason for reopening of assessment is total non application of mind, and thus, not sustainable in the eyes of law and labile to be quashed as was the crux of the submission made by the Ld. AR. He has further submitted that the Ld. A.O. proceeded with the reason of escapement of income of Rs. 2,50,00,000/- whereupon notice under Section 142(1) of the Act on 03.09.2024 was issued appearing at Page 73 to 76 of the paper book filed before us. The Assessee by and under is submission dated 02/01/2025 and 13.02.2025 explained that there was no such transaction of Rs. 2,50,00,000/- by the Assessee with the entities in question appearing at Pages 100 to 196 and Pages 197 to 204.

It is a fact that approval was wrongly taken on a wrongfactual finding and that too on the basis of completely different assessee and thus, proceeding under Section 148 of the Act is invalid and, therefore, liable to be set aside. In this regard, the Ld. DR relied upon the order of the Ld. A.O. and the Ld. CIT(A). Further income escaping assessment recorded is only of 35,00,000/- which is less than Rs. 50,00,000/- which is the prescribed monetary limit under Section 149(1) (b) of the Act and thus, the reassessment is without jurisdiction as argued by the Ld. AR.

Under these fact and circumstances of the matter, the Ld. Advocate appearingfor the Assessee further argued that since the reassessment proceeding has been initiated after the expiry of three years from the end of the relevant assessment year i.e. 2018-19, the Ld. A.O. was not justifying in proceeding with the assessment in deficiencies of provision of Section 149(1)(b) of the Act and thus, not sustainable. In this regard, he has relied upon the Judgment passed by the Co-ordinate Bench of the Tribunal in the case of Devendra Singh vs. Dy CIT in ITA No. 4715/Del/2025 dated 27.11.2025 reported in 2025 (12) TMI 590-ITAT, Delhi.

The Ld. DR has not been able to controvert the submissions made by the Ld. AR neither been able to rely upon any Judgment contrary to the ratio laid down as above in the favour of the Assessee.

Having heard the rival submissions made by the parties and in the facts and circumstances of the case since the reopening of assessment was made on the basis of notice issued under Section 148 of the Act dated 27.03.2024 completely on wrong finding of factbeing transaction entered into different assessee and further that the escapement of assessment, if any, is less than 50,00,000/- and further that there was no mentioning of income represented in the form of asset in compliance with the condition of Section 151 of the Act, the initiation of proceeding is found to be bad, illegal, erroneous and thus, liable to be quashed. Consequently, the entire proceeding is vitiated, void ab initio and thus, quashed.

Since the Assessee’s appeal on jurisdictional issue has been addressed and decided in favour of the Assessee, the appeal preferred by the revenue is found to have no merit and dismissed.

By way of appeal, the assessee has challenged the order passed by the Ld. CIT(A) in not considering the impugned reassessment proceedings as invalid, without jurisdiction, and without complying the legal requirements of the provisions of section 147/148/151/148A/149 r.w.s. Explanation-II of Section 148 of the Act. In fact, before the ld. CIT(A) this particular aspect of the matter duly raised by the Assessee that the information on the basis of which the assessment was initiated was nothing but search on the third party carried on 20.07.2022 wherein the information pertains to the assessee have been considered incriminating while computing income in the hands of the assessee. Since, search was conducted after 01.04.2021 amendment under the Finance Act, 2021 shall apply wherein it has been strictly directed to be followed that where the material found in the third-party search is relied upon for making assessment, department is required to issue notice following the provisions laid down on the 2nd proviso to Section 148 r.w.s. proviso (c) to Section 148 of the Act and therefore, prior approval from the PCIT is a mandatory obligation on the part of the authorities below for initiation of proceedings under Section 148 of the Act. Such failure on the part of the department makes the reassessment void, unsustainable, and thus, needs to be quashed as argued by the Ld. Counsel appearing for the assessee was not taken into consideration is in proper perspective as it also appears from order impugned though the same was raised before the Ld. CIT(A). Such legal and factual aspect of the matter has not been able to be controverted by the Ld. DR.

Thus, considering the entire aspect of the matter, in the absence of compliance of legal provision discussed hereinabove, the order impugned is found to be not sustainable in law and the entire proceedings is therefore liable to be quashed. We order accordingly.

Since, we have passed order in favour of the assessee quashing the entire assessment as vitiated, the Department’s appeal becomes infructuous and thus dismissed infructuous.