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Judgment
PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER:
This appeal is preferred by the assessee against the order dated 06.02.2026 of the Ld. Commissioner of Income Tax (Appeals)-29, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No: CIT(A), Delhi-29, 10800/2017-18 arising out of the assessment order dated 15.03.2025 u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT, Central Circle-25, New Delhi for AY: 2018-19.
On hearing both sides we find that ground No. 2 which is argued on behalf of the assesse to allege that the initiation of proceedings u/s 147 of the Act and completion of assessment u/s 147/143(3) of the Act was without jurisdiction and liable to be quashed and in this context, our attention was drawn to the fact that as per the notice of reopening copy of which is available at page Nos. 30-38 of the paper book wherein the allegation is that assesse has received accommodation entry from M/s Sirsa Deposits and Advances Ltd. in FY: 2017-18 and 2018-19 for amount of Rs.25,00,000/-& Rs.50,00,000/- respectively totaling to Rs.75,00,000/-. The reasons recorded that the undisclosed income of Rs.75,00,000/- is separate in AY; 2018-19 and 2019-20 in the form of deposits in bank. Thus, condition of Explanation of Section 149 of the Act and Explanation 2 of Section 148 of the Act are complied with and thereupon the approval of the specified authority was sought and the same was granted. We find that in the present appeal before us for AY; 2018-19 ultimately addition of Rs.75,000/- was made u/s 69C of the Act alleging that Rs.25,00,000/- were received by paying a commission of 3%. Further, an addition of Rs.25,00,000/-was made u/s 68 of the Act as unexplained credit in the books of assesse. Thereupon, an addition of Rs.1,62,51,990/- has been made on account of questioning the other loans advances of Rs.2,88,42,424/- by subtracting Rs.25,00,000/- already added u/s 69 and Rs.1,00,90,434/- declared in the return and further an addition of Rs.1,71,199/- was made on account of questioning of genuineness of payables of Rs.8,67,322/- which in ITR were reflected of Rs.6,96,123/-/-.
However, the matter of fact remains that the jurisdiction was assumed by issuing a show cause notice dated 29.03.2024 copy of which is available at page No. 30 of the paper book. Further, ld. DR asserts that there is no deficiency in the assumption of jurisdiction as the cumulative value of income which has escaped assessment has to be construed for the purpose of satisfaction of conditions of Section 149(1)(b) of the Act, however, we find that the issue stand settled against the department and for which reliance is rightly placed by ld. Counsel for the assesse on the decision dated 17.04.2025 in W.P. (C) 4845/2025 M/s L-1 Identity Solutions Operating Company Pvt. Ltd. wherein Hon’ble High Court in para 12 has observed as follows:
“12.It is apparent from the opening sentence of Section 149(1) of the Act that a notice under Section 148 of the Act for an assessment year cannot be issued beyond the period of three years unless the conditions under Section 149(1)(b) of the Act are satisfied. Thus, one of the said conditions is that the income alleged to have escaped assessment exceeds ₹50 lakhs or is likely to exceed ₹50 lakhs. Undisputably, the threshold amount of ₹50 lakhs of the income that has escaped assessment or is likely to escape assessment, is to be reckoned in respect of the specified assessment year. We say so because the conditions as set out in clause (b) of Section 149(1) of the Act are required to be read in conjunction with the opening sentence of Section 149(1) of the Act. The same is also made amply clear by use of the non obstante clause in Sub-section (1A) of Section 149 of the Act. A plain reading of Sub-section (1A) of Section 149 of the Act indicates that the condition of a minimum amount of ₹50 lakhs of income escaping assessment, may be satisfied by the cumulative amount that has escaped assessment or is likely to escape assessment in respect of more than one assessment year exceeding the said amount. However, the same is subject to the condition that the income chargeable to tax is represented in the form of an "asset" or "expenditure in relation to an event or occasion". Thus, in cases where the income that has escaped assessment is represented by 'an asset', notwithstanding that the said asset is on account of income that escaped assessment for more than one previous years, the condition under Section 149(1)(b) of the Act would be satisfied, if the value of the asset exceeds ₹50 lakhs. The same would hold true if there is an expenditure in relation to an 'event' or 'occasion', which exceeds the value of ₹50 lakhs. In this case as well as notwithstanding that the expenditure has been incurred in different previous years, the condition under Section 149(1)(b) of the Act would be satisfied if the cumulative value of the expenditure exceeds ₹50 lakhs, provided that the same is related to an event or occasion.
13.In the present case, it is apparent that there is no singular occasion or event which has resulted in the income of more than one previous year exceeding the sum of ₹50 lakhs. As noted above, the allegations against the Assessee are that it has undercharged its AE for the R&D Services rendered by it, and therefore, the income is required to be adjusted to the extent of ₹27 lakhs. Additionally, it is alleged that the Assessee has overpaid for certain managerial and group related services to the extent of ₹21 lakhs. None of these two adjustments can be stated to have been a part of a singular event or occasion spanning more than one previous year.
14.In our view, the AO has erred in proceeding on the basis that it was open for the AO to issue a notice under Section 148 of the Act bearing in mind the cumulative income that has escaped assessment in respect of FYs 2016-17, 2017-18 and 2018-19. It is impermissible for the AO to add income which is alleged to have escaped assessment for different previous years for determining the threshold figure of ₹50 lakhs as specified under Section 149(1)(b) of the Act.”
In the light of aforesaid discussion we are inclined to sustain the ground No. 2, accordingly, the appeal of the assesse is allowed and the impugned assessment order is quashed.