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Judgment
PER AMITABH SHUKLA, AM:
This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi, dated 19.11.2025 arising out of assessment order dated 06.01.2025 passed under section 147 r.w.s. 144 for the Assessment Year 2019-20. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.That, on the facts and circumstances of the case the Ld. CIT(A) has erred in law and on facts in upholding the order passed by the Ld. AO u/s.147 of the Act.
2.That, on the facts and circumstances of the case the Ld. CIT(A) has erred in law and on facts in upholding the initiation of the impugned proceeding by way of passing order u/s.148A(d) of the Act which was issued on wrong facts.
3.That the Ld. CIT(A) has erred both in law and on facts by passing the impugned order, without providing the appellant a fair opportunity of being heard, thereby violating the principles of natural justice.
4.That, on the facts and circumstances of the case the Ld. CIT(A) has erred in law and on facts in upholding the order passed by the Ld. AO which has been passed without giving proper opportunity of being heard and without following the decisions of the higher authorities.
5.That, based on the facts and circumstances of the case, the Ld. CIT(A) has erred both in law and on facts by upholding the order passed by the Ld AO disregarding the fact that no transaction as alleged by the department were made.
6.That the Ld. CIT(A) has erred in law as well as on fact by upholding the observation of the Ld. AO wherein addition has been made for the transactions which does not belong to impugned AY.
7.That the Ld. CIT(A) has erred both in law and on facts in sustain the addition of Rs 24,74,160/- made by the Ld AO u/s 69C by treating the purchases made as bogus.
Brief factual matrix of the case as culled out from the order of the lower authorities is that the assessee company had filed its Return of Income on 18.10.2019, declaring income of Rs.45,70,767/-. The Department was in possession of information that the assessee had undertaken high value financial transactions have with one Shri Rajan Kumar proprietor of A N Traders amounting to Rs.24,74,160/-. The Assessing Officer had issued a notice u/s 148A(b) of the Act dated 08.04.2023 as to why notice u/s 148 be not issued. The assessee had explained to the Assessing Officer that the payments made to A N Traders are opening balances and shown as creditors in the books and that therefore there cannot be any case of escapement of any income in AY 2019-20. The ld. Assessing Officer however proceeded to make order u/s 148A(d) dated 18.04.2023 holding that assessee has made bogus purchases from Shri Rajan Kumar Proprietor of A N Tranders. The ld. Assessing Officer concluded in para-3 of the impugned order that “…as the information was self-sufficient, no enquiries were required u/s 148A(a) of the Act….” . The ld. Assessing Officer further held in para-4 and 5 of his impugned order dated 18.04.2023 that the assessee had failed to furnish any documentary evidence in support of its claims that the payments are mere opening balances. During the course of assessment proceeding the assessee submitted that there was a mix-up of two parties and that it had actually dealt with M/s A N Traders whose proprietor was Shri Vishal Gupta and that it did not have any business connections with Shri Rajan Kumar, who was also proprietor of some A N Traders. The ld. Assessing Officer during assessment however placed reliance upon information received from the Investigation Wing and order u/s 148A(d) of the Act proceeded to dismiss the hypothesis propounded by the assessee and proceeded to make the impugned addition of Rs.24,74,160/- u/s 69C of the Act r.w.s. 115BBE of the Act.
At the outset, the ld. Counsel for the assessee submitted that it has raised legal ground of appeal no.2 challenging the impugned assessment order based upon an invalid notice u/s 148A(d) of the Act. The ld. Counsel submitted that the said legal ground aims to strike at the very root of the matter and therefore be adjudicated first in preference to other grounds. Accordingly, we hereby proceed to adjudicate first legal ground of appeal no.2 raised by the assessee.
We have heard rival submissions in the light of material placed on records.
The ld. Counsel for the assessee has vehemently argued that the order u/s 148A(d) is suffer from serious jurisdictional insufficiency. It was contended that the jurisdictional conditions prescribed u/s 147/148 are totally absent as there was no material to suggest escapement of any income. The ld. Counsel suggested that the Suspicious Transaction Report (STR) was for a third party and did not suggest any escapement of income in the hands of the assessee. It was argued that the available information suggested payment by the assessee which is not income. The ld. Counsel argued that in the order u/s 148A(d) it is evident that the Revenue was not in possession of any concrete any information alluding escapement of income and that it was a case of a mechanical reproduction of STR. In support of its contentions, the ld. Counsel has placed reliance upon a catena of judgments holding that there should be a live nexus between the information available and the escapement of income by the assessee. The ld. Counsel argued that no enquiry was conducted by ld. Assessing Officer u/s 148A before arriving at the conclusion of escapement of income.
We have noted that on nearly identical facts, a Co-ordinate Bench of this Tribunal in CO No.08/Del/2025 in the case of B.C. Enterprises has held that 148A(d) orders cannot be based upon fishing and roving enquiries and that there should be live material on records to connect the material with the assessee’s act of concealment. It was held that the Assessing Officer is required to first make all such information available to the assessee for his defense before arriving at any adverse conclusion. Similar view was held by another Co-ordinate Bench of this Tribunal in ITA No.3454/Del/2025 in the case of J. H. S Svendgaard Laboratories Pvt. Ltd.. We have also noted that Hon’ble Delhi High Court in their decision in the case of Sonansh Creations Pvt. Ltd. 170 taxmann.com 717 have held that an allegation of escapement of income has to be based upon demonstrative cogent evidences on record.
As far as the present case, we find force in the arguments of appellant assessee that there was no material available on records with the Assessing Officer at the time of passing of order u/s 148A(d) to suggest any escapement of income by the assessee. Accordingly, in respectful compliance to the judicial precedents discussed hereinabove, we quash the order u/s 147 dated 03.02.2025, which is based upon an invalid order u/s 148A(d) of the Act dated 18.04.2023. The ground of appeal no.2 raised by the assessee is allowed.
As the assessee has succeeded qua legal ground of appeal no.2, all other grounds of appeal on merits of the addition have become academic in nature and hence kept open.
In the result, the appeal of the assessee is allowed.