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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Ld. NFAC, Delhi dated 27.01.2026 arising from the assessment order under section 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred as 'the Act') dated 30.03.2022 passed by AO, NFAC, Delhi for the Assessment Year 2016-17.
The Assessee has raised the following grounds of appeal:
1.That on the facts and in the circumstances of the case, the order has been passed without affording adequate and effective opportunity to the assessee and is liable to be set aside.
2.That under the facts and circumstances, notice u/s 148 is barred by limitation and therefore invalid.
3.That under the facts and circumstances, reasons recoded for re-opening are factually incorrect, on borrowed satisfaction and without independent application of mind.
4.That under the facts and circumstances, approval u/s 151 is mechanical and without application of mind, rendering the reassessment invalid.
5.That under the facts and circumstances, addition of Rs. 57,87,000 u/s 69 being unexplained investment is unsustainable in law as well as on merits.
Brief facts of the case are that the assessee filed ITR for the A.Y. 2016-17 declaring total income at Rs. 2,25,010/- on 07.12.2016. Subsequently, information was received from DDIT(Inv), Unit-6(4), new Delhi that assessee has made investment in purchasing immovable property for consideration of Rs.57,87,000/- during the year under consideration but the assessee has not disclosed any source of investment. Hence, the JAO, after recording reasons in writing and with the prior approval of Competent Authority, issued the notice u/s 148 of the Act dated 31.03.2021 requiring the assessee to furnish his return of income for A.Y. 2016-17 within 30 days of receipt of notice.
In absence of any reply, the ld AO passed the order u/s 147/144 assessing the investment made in property of Rs 57,87,000/- as unexplained income u/s 69 of the Act.
On appeal, the CIT(A) dismissed the assessee’s appeal.
Aggrieved the assessee is before us. Before us the assessee submitted as under:
With respect to ground No. 3, it is submitted that Reasons are fatally defective being factually incorrect, mechanical and based on borrowed satisfaction.
Brief facts
- Assessee made payments aggregating to Rs. 57,87,000/- towards 03 properties during A.Y. 2015-16. The properties were registered subsequently A.Y. 2016-17.
- A.O. received information from DDIT (Inv.), Unit-6(4) alleging investment of Rs. 57,87,000/- and, on that basis, recorded reasons for reopening. (4)
- However, the reasons recorded are factually incorrect, mechanical and based on borrowed satisfaction, without proper verification of the material already available on record.
ONE: Complete payment made in A.Y. 15-16 and duly disclosed in ITR of A Y 15-16. No payment in AY 16-17, consequently no question of escapement of income in A Y 16-17
- The entire payment of Rs. 57,87,000/- was made during A.Y. 2015-16 as under:
Table-01
| Address | Amount | Date of payment | Date of registry | Pg. No. |
| Shop No 12, GF, Commercial Shopping Centre, Sector-7, Rohini, Delhi | 6,00,000 15,00,000 7,50,000 28,50,000 1,71,000 (stamp duty) 30,21,000 (Total) | 19.12.14 11.02.15 10.03.15 AY 15-16 | 07.04.15 | 27-sale deed 70, 71-Bank St 9-Bal Sheet |
| Plot No. A-15, Eco City, village Vishnuli Pargana, Dadri, Gautambudha Nagar | 5,00,000 50,000 2,50,000 8,00,000 40,000 (stamp duty) 8,40,000 (total) | 29.11.2014 19.12.14 AY 15-16 AY 15-16 | 13.05.15 | 43-sale deed 70 – Bank St 9 – Bal Sheet |
| Shop No. 19, GF, Village Bhankari, Faridabad | 18,00,000 1,26,0000(stamp duty) 19,26,000 (total) | 10.03.15 AY 2015-16 | 29.04.15 | 65 Sale deed 71 Bank Statement 9 Bal Sheet |
| Total payment for property Total Stamp duty (Total as per reasons) | 54,50,000 3,37,000 57,87,000 |
- Amount was duly reflected in the ITR/Balance Sheet of A.Y. 2015-16. (9) (16)
- The source of the investment was out of sale proceeds of another property amounting to Rs. 55,00,000/-, disclosed in the ITR for A.Y. 2015-16. (7)
- Only the registration of the properties took place in A.Y. 2016-17. Thus, there was no fresh investment/payment of Rs. 57,87,000/-in A.Y. 2016-17. (19, 36 & 53)
- Therefore, the allegation in the reasons that the assessee had made an unexplained. investment of Rs. 57,87,000/- during A.Y. 2016-17 is factually incorrect.
- The A.O. failed to verify the ITR and actual dates of payment, despite the relevant material being already available on record. This demonstrates non-application of mind.
- Hence, there was no escapement of income in A.Y. 2016-17 and the very basis of reopening is invalid.
Case Law On The Basis Of Factually Incorrect Reasons Of Reopening. The Reasstt. Is Invalid
CIT VS. KAMDHENU STEEL & ALLOYS LTD. (2012) 248 CTR (DEL) 33 SNG Developers Ltd. 404 ITR 312 (Del.) Ankita A. Choksey Vs. ITO & Ors. 411 ITR 207 (Bom.) M/s KLA Foods (India) Ltd. & Ors. ITA No.2846/Del/2015 Dtd.08.04.19
TWO: No "Reason to Believe" - Proceedings initiated merely for verification
- The A.O. himself recorded reasons for verification of investment by stating as "....needs to be verified."
Para-02 of reasons recorded
"The information has been analysed and it has been observed that the assessee purchased an immovable property for consideration of Rs. 57,87,000/- and the assessee couldn't explain the amount of Rs. 57,87,000/-. The financial details downloaded from ITD system and 360 degree profile of the assessee and the income declared by the assessee do not support the volume of investment made. Therefore, the said amount invested by the assessee in the immovable property needs to be verified."
- Thus, the A.O. had only a reason to suspect and had not formed a concluded belief that income had escaped assessment.
- The reasons merely proposed verification/investigation.
- Reopening u/s 147 cannot be initiated merely for verification or fishing/roving enquiry.
THREE: Borrowed Satisfaction and Mechanical Application of Mind
- The A.O. merely relied upon information received from DDIT (Inv.) without independently examining the underlying material.
- Had the A.O. examined the ITR for A.Y. 2015-16, he would have found that the amount was already reflected and the payments themselves pertained to A.Y. 2015-16.
- The failure to examine these basic facts demonstrates borrowed satisfaction and non-application of mind.
- Therefore, the reasons recorded cannot constitute valid "reason to believe" for assumption of jurisdiction u/s 147.
- Accordingly, the notice u/s 148 dated 31.03.2021 was issued without valid assumption of jurisdiction and is liable to be quashed.
Case Law: on borrowed satisfaction/without application of mind
Well Trans Logistics India (P.) Ltd. Vs Addl. CIT [2024] 166 taxmann.com 72 (Delhi) Dtd. 02.09.24 CIT v. Insecticides (India) Ltd., 357 ITR 330 (Delhi) PCIT v. Meenakshi Overseas (P.) Ltd., 395 ITR 677 (Delhi)
With respect to G. No.1, it is submitted that CITT(A) order is ex-parte, not decided on merits. Hence may be sent back to CIT(A) for deciding case on merits and other legal issues.
Per contra, the ld DR relied on the orders of AO/CIT(A).
We have heard the rival submissions and perused the materials on record. Before proceeding further, it would be prudent to reproduce the reasons recorded by the AO as under:
We find that the reasons for reopening was for verification of the amount invested in the immovable property. We are of the considered view that reopening under section 148 of the Act cannot be made for verification purposes. There are plethora of judicial precedents which holds that the Assessing Officer cannot issue a notice under Section 148 merely to conduct a fishing or roving inquiry or to re-examine records already submitted during the original assessment. There is a mandatory requirement of existence of specific, new tangible material leading to a reasonable belief that income has escaped assessment. Following the hon’ble Bombay High Court, in Nivi Trading Limited vs. UOI (Bom) W. P. No. 2314 of 2015 dated 07/04/2015; Smt. Maniben Valji Shah (2006) 283 ITR 453 and Prashant S. Joshi and Anr. V Income Tax Officer (2010) 324 ITR 154, we hold that notice under section 148 of the Act is ab initio void. We accordingly quash the notice as well as the consequent reassessment order u/s 147/144 of the Act.
In the result, appeal filed by the Assessee in ITA No.3503/Del/2026 is allowed.