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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal of the assessee is directed against the order dated 19.01.2026 of Id. CIT(A)/NFAC passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") wherein, the addition of Rs. 35,00,000/- u/s 68 of the Act made by the AO vide assessment order dated 26.05.2023 was confirmed.
Facts in brief as culled out from the orders of the authorities below are that the assessee, an individual, filed his return of income on 24.09.2016 declaring total income of Rs.25,19,900/-. Subsequently, on the basis of information received from the Investigation Wing, the case was reopened u/s 147 of the Act. The Assessing Officer alleged that the assessee had received an unsecured loan of Rs.35,00,000 from M/s Anuj Buildcon Pvt. Ltd. during F.Y. 2015-16 and that the said company was one of the shell companies controlled by Shri Joginder Pal Gupta. In response to the notices, the assessee furnished, the ledger account, bank statements, confirmation of the lender, details of the loan, financial statements and other documents. The assessee further stated that the loan was subsequently repaid through banking channels in F.Y. 2021-22 and furnished the relevant bank statement and balance confirmation. The Assessing Officer provided opportunities for cross-examination through video conferencing on 18.05.2023, 19.05.2023 and 24.05.2023. On the first two occasions, cross-examination could not take place due to technical problems; on 24.05.2023, neither the assessee nor Shri Joginder Pal Gupta attended the hearing. However, the Assessing Officer rejected the assessee's explanation and held that M/s Anuj Buildcon Pvt. Ltd. was a shell company and that the Rs.35,00,000/- loan represented an accommodation entry. Consequently, the AO made an addition of Rs.35,00,000/- u/s 68 r.w.s. 115BBE as unexplained credit, thereby determining the total income at Rs.60,19,900. Penalty proceedings u/s 274 r.w.s. 271(1)(c) were also initiated.
Aggrieved by the assessment order, the assessee filed appeal before the Id. CIT(A). The Id. CIT(A) held that the assessee had obtained an accommodation entry of Rs.35,00,000/- from M/s. Anuj Buildcon Pvt. Ltd. and, accordingly, treated the said amount as unexplained credit u/s 68 r.w.s. 115BBE of the Act. The Id. CIT(A), however, did not find merit in the submissions of the assessee and confirmed the addition of Rs.35,00,000/- made u/s 68 of the Act.
Aggrieved by the impugned order, the assessee filed appeal before us and has raised the following grounds of appeal:
'1. Ground- 1. General Ground: That the order passed by the Learned Commissioner of Income Tax (Appeals) [hereinafter referred to as "Ld. CIT(A)"] is contrary to the facts of the case, bad in law, and passed in violation of the principles of natural justice.
2.Ground 2. Addition u/s 68 - Rs. 35,00,000/-: That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of Rs. 35,00,000/- on account of an alleged "accommodation entry" of an unsecured loan from M/s Anuj Buildcon Pvt. Ltd. u/s 68 read with section 115BBE of the Income Tax Act. 1961.
3.Ground 3. Disregard of Documentary Evidence: The Ld. CIT(A) failed to appreciate that the Appellant had discharged the primary onus u/s 68 by proving the identity, creditworthiness of the lender, and the genuineness of the transaction through books of accounts, bank statements. Interest on Loan and TDS thereon deducted and deposited, further more entire loan amount along with Interest has already been paid off till 31st March 2022.
4.Ground 4. Failure to Grant Effective Cross-Examination: The Ld. CIT(A) erred m confirming the addition despite the fact that no meaningful opportunity for cross-examination of the witness, Shri Joginder Pal Gupta, was provided. The mere scheduling of a Video Conference without ensuring the presence of the witness constitutes a denial of the right to cross-examine, thereby making the statement of the witness inadmissible against the Appellant.
5.Ground 5. Reliance on Retracted Statements: The Ld. CIT(A) erred in relying upon the initial statement of Shri Joginder Pal Gupta while summarily rejecting the subsequent retraction filed by him. It is a settled position of law that a retracted statement, in the absence of independent corroborative evidence, cannot form the sole basis for an addition.
6.Ground 6. Shell Company Allegation: The Ld. CIT(A) erred in concluding that M/s Anuj Buildcon Pvt. Ltd. is a "shell company" based on suspicion and conjectures, ignoring the fact that the loan was received through regular banking channels and the lender was a distinct legal entity.
Ground 7. Interest u/s 234A, 234B, and 234C: That the Ld. CIT(A) erred in confirming the levy of interest under sections 234A, 234B, and 234C, which is consequential and mandatory in nature but ought to be deleted upon the deletion of the primary addition."
The assessee has also raised the addition grounds of appeal which is as under:
"A. That the approval given by the ld. PCIT, Delhi-01 to the order passed u/s 148A(d) as well as issue of notice u/s 148 is out of jurisdiction, which makes the order dated 26.05.2023 passed u/s 147 r.w.s. 144B nonest, void-ab-initio and bad in law."
In support of his application seeking permission to raise additional grounds, it is argued that it is purely a legal ground and the necessary facts are already on record and therefore relying upon the case of National Thermal Power Company Ltd. Vs. CIT reported in 229 ITR 383(SC), it is submitted that additional grounds may be admitted and adjudicated in favour of the assessee. In view of the judgment of the Hon’ble Apex Court, the additional grounds taken up by the assessee are hereby admitted.
We have heard the Id. AR and the Id. DR. At the very outset, the Id. AR submitted that the Id. CIT(A) vide impugned order dated 19.01.2026 has not decided the legal issue raised in grounds as per Form 35 wherein the assessee has raised the ground that proceeding initiated u/s 148 vide notice dated 30.06.2021 were bad in law since the approval obtained u/s 151 was bad in law and the subsequent notice u/s 148 on 11.07.2022 was also bad in law. It is further argued that the approval was required to be obtained from PCIT whereas the approval for issuing notice u/s 148 dated 26.07.2022 was obtained from PCIT-1, Delhi as placed at page 2 of the paper book wherein it is mentioned that this notice is being issued after obtaining prior approval of PCIT-1, Delhi. It is further argued that the case is covered by the Union of India & Ors. Vs. Rajeev Bansal (2024) 469 ITR 46 (SC) as well as co-ordinate bench decision in the case of DCIT Vs. Rudra Buildwell Homes (P.) Ltd. (2025) 178 taxmann.com 55 (Del. Trib.). Thus, the only issue to be determined by us is whether the notice u/s 148 is bad in law as the approval of the competent authorities is not obtained before issuing the notice.
In that regard, we have also heard the ld. DR who has relied upon the decision of the ld. lower authorities and did not submit anything regarding the approval being issued by incompetent authorities i.e. PCIT in place of PCCIT.
We have heard the rival submissions and perused the material placed on record. It is an admitted fact that where more than three years had elapsed from end of relevant assessment year, sanction for reopening was to be obtained from Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as per section 151(ii) of the Act. It is an admitted fact that in the instant case the approval was obtained u/s 151 of the Act from the PCIT-1, Delhi and notice u/s 148 of the Act was issued on 26.07.2022, which demonstrates that notice dated 26.07.2022 u/s. 148 of the Act was issued without validly complying with section 151 of the Act which is not in accordance with law and thus invalid, in view of the Hon’ble Apex Court decision in the case of Rajeev Bansal (supra) wherein it has been laid down as under:
> “73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v.ITO [1996] 87Taxman 315/221 ITR 538 (SC) /[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:
Regime Time limits Specified authority Section 151(2) of the old regime Before expiry of four years from the end of the relevant assessment year Joint Commissioner Section 151(1) of the old regime After expiry of four years from the end of the relevant assessment year Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner Section 151(i) of the new regime Three years or less than three years from the end of the relevant assessment year Principal Commissioner or Principal Director or Commissioner or Director Section 151(ii) of the new regime More than three years have elapsed from the end of the relevant assessment year Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General 74.The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:
(i)If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and
(ii)If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
75.After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:
(i)If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and
(ii)If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be, issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General."
In view of above factual matrix and respectfully following the aforesaid decisions, we hold that the notice issued u/s 148 of the Act is bad in law and thus invalid, hence, the same is quashed and accordingly, the consequent assessment order is also quashed.
In the result, the appeal of the assessee is allowed.