M D Overseas Pvt. Ltd. vs DCIT

PER MANISH AGARWAL, AM :

The present appeal is filed by assessee against the order dated 12.01.2026 by Ld. Commissioner of Income Tax (A), Delhi-26 [“Ld.CIT(A)”] in Appeal No. CIT(A), Delhi-26/10168/2012-13 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 28.03.2025 passed u/s 147 r.w.s. 143(3) of the Act pertaining to Assessment Year 2013-14.

Brief facts of the case are that assessee is a company, filed its return of income on 29.11.2013, declaring total income of INR 14,56,00,230/-. A search and seizure action u/s 132 was carried out in the case of M/s Faith Jewellers, Prop. Shri Naval Kishor Goyal on 20.12.2016 wherein statements of Shri Nawal Kishor Goyal, Proprietor of M/s. Faith Jewellers were recorded. During the course of investigation, it was unearthed that the M/s. Faith Jewellers were providing accommodation entries. Based on such information, notice u/s 148 was issued on 15.04.2021 in the case of the assessee who has made purchases from M/s Faith Jewellers. Against the said notice, assessee filed a writ before the Jurisdictional High Court who in terms of its order dated 27.12.2021, has quashed the proceedings so initiated in W.P.C.No.7903/2021 and others vide order dated 15.12.2021. Copy of the same is placed at page 72 to 180 of the Paper Book. Thereafter, based on the information found/seized in the search carried out in the case of Alankit Group, satisfaction was recorded in the case of the assessee and proceedings were initiated u/s 153C of the Act for AY 2010-11 to 2020-21. The satisfaction note dated 16.03.2022 is placed at page 181 to 183 of the Paper Book. The said satisfaction note was challenged by the assessee before the Hon’ble Jurisdictional High Court where the hon’ble High Court vide its order dated 30.04.2024, has quashed the notice issued u/s 153C of the Act. In the meantime, and in terms of the order passed by Hon’ble Supreme Court in the case of Union of India vs Ashish Agarwal, the notice issued u/s 148 on 15.04.2021 was treated as “deemed notice” u/s 148A(b) of the Act and information was supplied to the assessee on 26.05.2022. In response, the assessee filed reply on 08.06.2022 and thereafter, the order u/s 148A(d) of the Act, was passed on 26.07.2022 and notice u/s 148 was issued on 29.07.2022. In response to the said notice, the assessee filed return of income on 09.08.2022. Since the proceedings u/s 153C were initiated in terms issued u/1s 153C of the Act on 05.09.2022, the proceedings pending u/s 148 were abated and AO proceeded to complete the proceedings u/s 153C of the Act however, as observed above on 30.04.2024, the Hon’ble Jurisdictional High Court has quashed the notice issued u/s 153C of the Act and therefore, the AO has revived the proceedings initiated by issue of notice u/s 148 dated 29.07.2022 and the reassessment order was passed u/s 148 of the Act and concluded the proceedings in terms of the order passed u/s 147 r.w.s. 143(3) of the Act dated 28.03.2025 by making addition of INR 24,21,552/-being 2 % commission paid for obtaining alleged accommodation entries of INR 12,10,76,622/-. It is relevant to state here that in the order passed u/s 148A(d) of the Act, satisfaction note was recorded of the escapement of income of INR 12,10,76,622/- being the accommodation entry taken by the assessee from M/s. Faith Jewellers. In the said order vide para 8 of the order, satisfaction was recorded that income escaped exceeded the value of assets as provided u/s 149(1)(b) of the Act as the case of the assessee was re-opened after the expiry of a period of 03 years from the end of relevant Assessment year.

Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 12.01.2026, dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

Apart from these Grounds of appeal, in Ground of appeal No.7 assessee has challenged the re-opening of the assessment u/s 149(1)(b) of the Act where the income escaped was less than INR 50.00 Lakhs. It was the claim of the assessee that in the instant case, assessment year under reference was re-opened beyond the period of three years from the end of the relevant assessment year however, in the order passed u/s 148A(d) of the Act, the satisfaction of escapement of income was recorded for 12,10,77,622/- which is more than the threshold limit of INR 50.00 Lakhs. Ld. AR submits that reassessment order was passed by making addition of INR 24,21,552/- which is less than the limit provided u/s 149(1)(b) of the Act. Further such amount was held as the commission payment which cannot be treated as the income represented in the form of assets as envisaged in section 149(1)(b) of the Act. AS per ld. AR the approval granted u/s 151 of the Act without satisfying the addition u/s 149(1)(b) is not correct and thus the entire reassessment proceedings deserve to be quashed. In support of the same, reliance is placed on the following judgments:-

[i] Bhagirathi Krishnan, C/o-Anil Jain DD & Co. Versus Income Tax Officer, Ward-35 (5), Civic Centre, New Delhi, 2026 (1) TMI 458- ITAT DELHI, Dated:- December 1, 2025;

[ii] Ms. Sonali Dharmendra Mhatre Versus Income Tax Officer, Ward 3 (2), Kalyan, 2025 (5) TMI 1481-ITAT MUMBAI, Dated:- April 28, 2025; and

[iii] Sonansh Creations Pvt. Ltd. Versus Assistant Commissioner of Income Tax And Anr., 2025 (1) TMI 708-DELHI HIGH COURT, Dated:- January 10, 2025

Per contra, ld. Sr. DR vehemently supported the orders of the lower authorities and submits that case of the assessee was rightly reopened in terms of the order of hon’ble Supreme court in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. reported in [2023] 149 taxman.com 399 (SC) and satisfaction was recorded of INR 12,10,77,622/- which is more than the threshold limit of INR 50.00 Lakhs represented in the form of assets. He prayed accordingly.

Heard the contentions of both the parties at length and perused the material available on record. In the instant case, it is a fact that the case of the assessee is re-opened after a period of 03 years from the end of the relevant assessment year and the order u/s 148A(d) of the Act was passed on 26.07.2022 and notice was issued u/s 148 of the Act on 29.07.2022.

It is further observed that in the assessment order passed, addition has been made @ 2% on such alleged accommodation entries which is less than the threshold limit of INR 50.00 Lakhs as prescribed u/s 149(1)(b) of the Act. Once the condition as provided u/s 149(1)(b) is not fulfilled, proceedings cannot be completed u/s 147 of the Act. This view is supported the judgment of Hon’ble Bombay High Court in the case of Rohan Shelters Pvt. Ltd. Vs. ITO in WP No. 1038 of 2026 vide order dt. 11.09.2026 wherein the Hon’ble High Court has held that where the satisfaction in section 148A(d) is recorded of escapement of income in the form of assets exceeding INR 50.00 Lakhs however, in the final assessment addition was made by applying percentage which was less than the threshold limit provided u/s 149(1)(b) of the Act, the notice issued u/s 148 is bad in law as the same does not satisfy the parameter set out under section 149(1)(b) of the Act.

In the instant case, the facts are identical where in the order passed u/s 148A(d) the AO has recorded the satisfaction of escapement of income of INR 12,10,77,622/- however in the order passed u/s 148 of the Act, the addition was made of INR 24,21,552/-by applying the rate of 2%. Thus, by respectfully following the judgement of the hon’ble Bombay high court in the case Rohan Shelter (supra), we hold the proceedings initiated u/s 148 of the Act for the income less than INR 50.00 Lakhs as provided u/s 149(1)(b) of the Act is bad in law which vitiated the entire reassessment proceedings. Accordingly, Ground of appeal No.7 raised by the assessee is allowed.

Since we have allowed the legal grounds of appeal taken by the assessee and quashed the reassessment order, remaining grounds of appeal become academic and thus, not adjudicated.

In the result, appeal of the assessee is allowed.