Richhpal Steel Udyog Private Limited vs ITO, Ward 2(2), Ghaziabad Uttar Pradesh

PER SUDHIR KUMAR, JM:

This appeal by the assessee is directed against the order of Ld. NFAC, Delhi, dated 17.6.2025 pertaining to A.Y. 2009-10 arising out of the assessment order dated 27-03-2015 passed by the ITO, Ward 2(2), Ghaziabad under Section 143(3)/147 of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’].

Brief facts of the case are that the assessee is a company who had filed its return of income on 24/02/2010 declaring income of Rs.21,777/- in response to notice u/s 148 of the I.T. Act, 1961. In this case, an information was received from the Director of Income Tax Intelligence, Kanpur, that the assessee has allotted shares at unreasonable premium during the year. Subsequently, notices u/s 142(1) of the I.T. Act, were issued from time to time to furnish the necessary compliance of the notices issued. In response, AR of the assessee appeared and furnished a reply dated 12/08/2014. Notice u/s 143(2) dated 14/08/2014, was issued to the assessee for hearing on 20/08/2014. Further, notices u/s 142(1) was issued from time to time and in compliance to the notices, the Ld. AR of the assessee appeared and case was discussed with him. The assessee furnished copy of balance sheet, computation of income and copy of ITR. The assessee was asked to furnish the basis of allotment of shares on premium of Rs.33,60,000/- and also furnish the details business carried out business plan during the year vide questionnaire dated 28/01/2015. The assessee was further asked to furnish the details of reserve and surplus amounting Rs.1,17,31,520/-, details of loan & advances Rs.44,50,000/- taken during the year with complete addresses alongwith their confirmations and details of loan & advances Rs.87,00,000/- given during the year, with complete addresses alongwith their confirmations. The assessee has declared loss of Rs.21,777/- having no business during the year. The assessee furnished in his computation of income vide his reply dated 12/08/2014 that assessee is dealing in trading of steel. In his written reply the assessee stated that there is an addition of Rs.41,40,000/- to the share premium account which was received from three different parties namely M/s SK Fintex Pvt. Ltd. Rs. 30,00,000/-, Activ Promotions & Events Pvt. Ltd., Rs.7,50,000/- and Singh Chander Marketing Pvt. Ltd., Rs.7,50,000/-. From the perusal of computation of income as well as P/L A/c, it has been found that assessee's net profit is Rs.98,422/- alongwith agricultural income Rs.1,20,200/-during the year, but the assessee has wrongly deducted the net profit from the agricultural income and the same is disallowed. The assessee also stated that interest was not charged on loan & advances Rs.87,00,000/- under the head current assets because the company has not given any interest on unsecured loan taken during the year. The assessee has advanced loan for Rs.87lacs, during the year without charging any interest. Since, the above loan have been advanced without any business purpose, hence, it is assumed that interest should be earned by the company on above advance. Thus, the AO estimated Rs.5,31,577/- as interest @6.11% on above advance and made an addition of Rs.5,31,577/- on account of interest charged on the advance of Rs. 87 lacs during the year. The AO assessed the total income of the assessee at Rs. 92,00,000/- vide assessment order dated 27.3.2015 u/s. 143(3) r.w.s. 147 of the Act. Aggrieved by the said order, the assessee preferred the appeal before the Ld. CIT(A), who vide order dated 17.6.2025 partly allowed the appeal of the assessee.

Aggrieved, assessee is in appeal before us.

Ld. AR for the assessee submitted that ld. CIT(A) erred in not holding that the impugned assessment order passed u/s. 147/143(3) dated 27.3.2015 is void ab initio, because it is founded on the invalid notice u/s. 148 of the Act. He also submitted that while issuing the notice u/s. 148 of the Act, no approval was taken by the competent authority. So the assessment becomes invalid and liable to be quashed.

Ld. DR submitted that the assessee has not made any objection during the proceedings before the AO or ld. CIT(A) with regard to issuance of notice u/s. 148 as well as approval u/s. 151 for reopening the case for AY 2009-10. In the written submissions, the Ld. Sr. DR. submitted that the jurisdictional error was not committed by the lower authorities by relying upon the decision of the Hon’ble Madras High Court in the case of Venkatesan Raghuram Prasad vs. Income Tax Officer, Tax Case (Revision) No. 798 of 2017 wherein, it has been held that

It was submitted that since, no objection was raised by the assessee with regard to approval u/s. 151 of the Act, during entire assessment proceedings nor before the CIT(A), the ratio of above judgement squarely applies in the case of the assessee. Therefore, the claim of the assessee at this stage is not acceptable.

We have heard the rival contentions and gone through the facts and circumstances of the case during the course of hearing. Before us, Ld. Counsel for the assessee filed the copy of notice dated 28.3.2014 issued u/s. 148 of the Income Tax Act, 1961 by the ITO, Ward-2(2), Ghaziabad which reads as under:-

On plain reading of the aforesaid notice issued u/s. 148 of the Act, it is observed that the said notice dated 28.3.2014 issued u/s. 148 of the Act is totally vague and mechanical and without application of mind, because there is nothing is strike off and everything left open/blank by the ITO, Ward 2(2), Ghaziabad which shows that the notice is invalid and all the assessment on the basis of this notice become void ab initio, thus, the assessment order is liable to be quashed on this account.

Further, during the hearing of the proceedings, Ld. Counsel for the assessee filed a copy of letter dated 08.12.2025 of the Ld. AR, addressed to the ITO/ACIT, Ward 2(2)(2)/Circle 2(1)(1), Ghaziabad seeking (i) copy of reasons recorded u/s. 147 of the Act, (ii) copy of approval / sanction u/s. 151 of the Act and (iii) copy of notice issued u/s. 148 of the Act. (2) and sanction u/s. 151, if any, the contents of the letter are reproduced as under:-

We further find that Assessing Officer has made an order sheet noting/ purported satisfaction / reasons recorded u/s. 148(2) as supplied vide certified copy (noting dated 28.3.2014) of ITO Ward 2(2), Ghaziabad (no sanction u/s. 151), the contents of the satisfaction note are reproduced as under:-

In view of the aforesaid discussions, we are of the considered view that the ITO, Ward 2(2), Ghaziabad has recorded the satisfaction note on 28.3.2024 and without obtaining prior approval of the competent authority, issued the notice u/s. 148 of the Act on the same date viz. 28.3.2024, thus, the said notice issued u/s. 148 of the Act is totally vague and mechanical and without application of mind It is also noted that in the said notice issued u/s. 148 of the Act, there is nothing is strike off and everything left open/blank by the ITO, Ward 2(2), Ghaziabad which shows that the notice is invalid and the consequent assessment on the basis of this invalid notice has become void ab initio, thus, the assessment order is erroneous and quashed on this account.

Since we have quashed the assessment, the other ground being academic in nature, hence, need not be adjudicated at this stage.

In the result, the appeal of the assessee is allowed.