S D Interiors Private Limited vs Income Tax Officer, Ward 22(1)

PER MANISH AGARWAL, A.M.:

The present appeal is filed by assessee against the order dated 20.02.2026 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2012-13/10258718 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 10.05.2023 passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act pertaining to Assessment Year 2013-14.

Brief facts of the case are that the assessee is a company, filed its return of income on 13.09.2013, declaring loss of INR 16,246/-. A search and seizure action was carried out on 16.10.2020 u/s 132 of the Act at the premises of Shri Navin Mahipal wherein one Sale Deed was found according to which the assessee has purchased a property situated at Village-Budhena, Faridabad for a total consideration of INR 3,90,41,875/- and further paid registration charges of INR 27,33,000/-. Accordingly, reassessment proceedings were initiated and notice u/s 148 was issued 19.04.2021. Thereafter, the said notice was treated as information u/s 148A(b) of the Act in terms of order of Hon’ble Apex Court in the case of Union of India vs Ashish Agarwal reported in 2022 SCC Online SC 543 (SC). Assessee had filed the objections and after considering the same, order u/s 148A(d) of the Act was passed on 26.07.2022 and notice u/s 148 was issued on the same date to file the return within 30 days. The assessee has filed return of income in response to notice u/s 148 of the Act on 04.08.2022, declaring same income as was declared u/s 139(1) of the Act. Thereafter, the assessee has not made compliance to any of the notice issued and therefore, the AO held the total investment of INR 4,17,74,875/- in acquisition of the property as unexplained investment and made the addition u/s 69 of the Act.

Against the said order, the assessee is in appeal before ld. CIT(A) wherein additional evidence under Rule 46A of the Income Tax Rules, 1962 were filed. Ld. CIT(A) obtained a Remand Report from the AO and after considering the Remand Report, has confirmed the addition made by the AO vide order dated 20.02.2026 and thus dismissed the appeal of the assessee.

Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking following Grounds of appeal:-

Before us, with respect to Ground of appeal No.1, ld.AR for the assessee submits that as per the reasons provided, information was found during the course of search conducted on 16.10.2020 in the case of Naveen wherein one Agreement to Sale was found with respect to the property purchased by the assessee. Therefore, in the show cause notice issued u/s 148A(b) of the Act, AO has asked the assessee to explain as to why not the same should not be treated as unexplained investment by alleging that such property was not disclosed in the final accounts submitted. Ld. AR submits that in the order passed u/s 148A(d) of the Act, the satisfaction was recorded of the escapement of income with respect to the source of payment of purchases consideration and not of holding the same as undisclosed investment as was asked in the notice u/s 148A(b) of the Act. Ld.AR submits that the satisfaction was recorded in the order passed u/s 148A(b) of the Act on the issue other than the issue on which the show cause notice was issued. Ld.AR further submit that the subject property was duly declared in the Balance Sheet filled in the return of income and thus was available with the AO and therefore, it cannot be said that the said property was not disclosed. Ld.AR submits that merely for making verification, the case was re-opened. He placed reliance on the judgement of Hon’ble Delhi High Court in the case of Catchy Prop-Build Pvt.Ltd. vs ACIT & Anr. reported in [2022] (10) TMI 771 (Del.) & Usha Rani Girdhar vs ITO in WP (C) 16090/222 (Del.) wherein it is held that if the foundational allegation made in the notice issued u/s 148A(b) of the Act is not matching with the order passed u/s 148A(d) of the Act, such reassessment proceedings are void ab-initio and the same cannot be cured by supplementary notice.

On the other hand, ld. Sr. DR for the Revenue submits that during the course of assessment proceedings, assessee has failed to file any information and therefore, the Remand Report was called for with respect to defect in the notice issued u/s 148A(b) and 148A(d) of the Act. Ld. Sr. DR submits that once satisfaction was recorded that the source of investment in assets remained unexplained therefore, the provision has rightly been invoked by the AO and requested for the confirmation of the reassessment proceedings.

Heard the contentions of both parties at length and perused the material available on record. From the perusal of the notice issued u/s 148A(b) dated 26.05.2022, it is observed that the AO was show-caused the assessee to explain the transactions of purchase of land for INR 3,90,41,875/- which was found recorded in the books of accounts of the assessee. Thereafter in the order passed u/s 148A(d) of the Act, it was observed by the AO that investment in the said property was made out of the funds received from the holding company M/s Emroyal Shiksha P. Ltd. however, the source of such funds remained unexplained and therefore, satisfaction was recorded about escapement of income to the extent of investment made in acquisition of the property. Though in both the notices, the amount of escapement of income was the same however, as per initial notice u/s 148A(b) of the Act, the AO alleges that this property was not shown in the books of accounts thus, remained unexplained, therefore, income for this reason has escaped assessment. whereas in the order passed u/s 148A(d) of the Act, the AO has changed its stand and held that though the property was declared but the source of investment is not explained and there is no whisper about the show cause notice where asset was alleged as undisclosed. This clearly proves the divergent view taken by the AO while passing the order u/s 148A(d) for recording the satisfaction of escapement of income.

The Hon’ble Jurisdictional High Court in the case of Catchy Prop-Build Pvt. Ltd. (supra) and further in the case of Toska Master vs DCIT reported in [2024] (8) TMI 565 (Del.) has held that reasons for re-opening the assessment u/s 148A(d) must be same as stated in the notice/ information supplied u/s 148A(b) of the Act. The addition on fresh or supplementary reasons is impermissible. This view is further supported by the judgement of Co-ordinate Bench of the Delhi Tribunal in the case of Shalini Chabra vs ITO in ITA No.4858/Del/2025.

In view of the above discussion, we are of the considered view that in the instant case there was complete variation and diversion from the issue on which the assessee was called upon to explain by issue of notice u/s 148A(b) of the Act before for re-opening the assessment and thereafter the conclusion of escapement of income was drawn as per the order passed u/s 148A(d) wherein the satisfaction was changed altogether to another reason. Such action of change in Gold post has been held to vitiate the reassessment proceedings and thus, the reassessment order passed based on such invalid satisfaction is hereby, quashed.

Since we have already allowed assessee’s legal Ground in above-mentioned paras, the other Grounds of appeal raised by the assessee are not adjudicated.

In the result, appeal of the assessee is allowed.