MadhuBala vs ACIT, Central Circle -16

PER ANUBHAV SHARMA, JM:

This appeal is preferred by the assessee against the order dated 20.01.2026 of the Ld. CIT(A)-26, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order No: ITBA/APL/S/250/2025-26/1084973272(1) arising out of the assessment order dated 26.03.2025 u/s 147 r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the ACIT, CC-16, New Delhi, for AY: 2021-22.

Heard and perused the record. At the time of arguments ld. Counsel has argued on the legal issue whereby assesse has challenged the impugned assessment order on the basis that the approval granted u/s 148B of the Act is vitiated and not in accordance with law. In this context, we find that consequent to search and seizure operation case of assesse was centralized and assesse had filed return of income on 28.12.2021. The case of assesse was reopened u/s 147 of the Act after taking prior approval of Pr. CIT(Central-2), Delhi as per explanation 2 (iv) to Section 148 of the Act. Assessee has filed before us the copy of the approval at page No. 13-17 of the paper book and for convenience we reproduce the same:

The contention of ld. Counsel is that this notice dated 29.08.2023 is not in accordance with law as the same is vague and there is no satisfaction recorded as to what is the quantum of income which has escaped assessment and that while granting approval ld. Authority has merely accepted the recommendations of Additional CIT in the Annexure A which also do not indicate as to which all documents seized during the search were relating to assesse and disclosed any information found in the search of other person and which provide live nexus to reopen the case, thus this reopening is vitiated. Reliance in this regard is placed on the decision of Hon’ble Delhi High Court in APKS Buildmat Pvt. Ltd. Vs. ITO W.P. (C) 6751/2023 (19.05.2023) and Hon’ble Bombay High Court in Tata Business Support Services Ltd. Vs. DCIT Circle 1(2) Writ Petition No. 2959 of 2015 dated 26.03.2015 and Coordinate Bench decision in Optus Developers Private Limited and particular reference was made to Hon’ble Gujarat High Court decision in Trupti Aakash Desai Vs. ITO, Ward 3(3)(5) Ahmedabad special Civil Application No. 985 of 2026 (08.04.2026) to contend that the principle laid down in the judicial decisions have not been followed.

Ld. DR has however defended the approval and as submitted that there is no ambiguity in the reasons as recorded and further reliance was placed on the provision of Section 292BC of the Act to submit that approval cannot be questioned at this stage.

As we examined the content of the notice u/s 148 along with Annexure A2 which is the profarma for approval by the specified authority which in itself has Annexure A & Annexure B and which for convenience we have reproduced by way of scanning, above we find that in the notice dated 29.08.2023 in first bullet point it is not specifically mentioned that the case of the assesse has been reopened on the basis of information in the case of the assesse or in the case of other person. In second bullet point it is not coming up as to approval was taken from which specified authority. Then, in para 2 AO alleges that by way of notice he proposes to assess or reassess such income or recompute the loans or the depreciation allowance or any other allowance for AY: 2021-22. The content of the notice indicates as if a profarma of the notice has been used which certainly is not prescribed under the Act or the rules thereupon. The notice issued u/s 148 of the Act is a vital consequence and certainly should indicate expressly his jurisdiction has been assumed in the case of assesse as searched person or the person other than the searched as the corresponding approval required to be taken has different scope.

In the aforesaid context, if the approval is examined in the form of proforma for approval Annexure A2 and the corresponding Annexure A & Annexure B appended to Annexure A2. We find that nowhere the AO or the Addl. CIT Central Range-4, putting recommendations in annexure A or ld. PCIT-2, Central Delhi giving sanction in Annexure B, if at all even mentioned of the quantum of escapement. A perusal of these three documents indicate that merely contents of Bare Act provisions of Explanation 2 (iv) to Section 148 of the Act and Section 149(1)(a) of the Act are mentioned. The proforma for approval drawn by the AO and the corresponding Annexure A & Annexure B only mention of a search being initiated u/s 132 of the Act of a specific group on 17.11.2021 and what was the information available or document found has not been specifically narrated and in very broad manner AO mentions “information contained in the books of account/ documents seized during search relates to assesse”. In Annexure A while giving recommendations Addl.CIT, Central Range-4, Delhi makes similar reference and so does ld. PCIT-2, Central, Delhi while giving the approval merely refers the narration of facts of the AO in column 7 and the recommendations of the Addl.CIT, Central Range, 4, Delhi to grant of approval.

Thus, the approval as such is granted is on vague information and certainly nothing is there as live link and same only indicates non application of mind and a mechanical exercise of powers of reopening while law indicates that due application of mind becomes basis of recording reasons for reopening. The impugned show cause notice or the corresponding proforma for approval in the approval so granted do not exhibit any supporting material having live nexus with the material found during search revealing information in case of assesse for reopening the assessment. We are of the considered view that in order to exercise these powers of reopening by recourse to explanation 2(iv) to Section 148 of the Act, apart from the seized material found during search there should be some other live nexus of the seized material to indicate an escapement of income in the case of the person whose case is being reopened. As for this proposition our attention has been drawn by ld. Counsel to the decision dated 16.09.2025 of Hon’ble Gujrat High Court in R/Special Application No. 210 of 2024 and Others titled Dhirajlal Laljibhai Patel Vs. ACIT, Central Circle-1(2) in Trupti Aakash Desai Vs. ITO, Ward 3(3)(5) Ahmedabad R/Special Civil Application No 985 of 2026 order dated 08.04.2026, where Hon’ble Gujarat High Court observes in para 6.3 as follows:

Thus, in the given facts and circumstances having considered the impugned notice u/s 148 dated 29.08.2023 and the corresponding proforma of approval along with approval granted, made available at page No. 13-17 of the paper book and reproduced by us above, we are inclined to sustain ground no. 10(A), 10(B), 10(D), 10(E) & 10(F). As consequence of same, the appeal is allowed and the impugned assessment order is quashed.