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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-30, New Delhi, dated 24.12.2025 arising out of assessment order dated 28.03.2025 passed by Ld. DCIT, Central Circle-32, New Delhi, under section 147 of the Act for the Assessment Year 2019-20. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
A) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being jurisdictionally flawed on multiple counts;
B) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being based on invalid (mechanical) jurisdictional notice u/s 148 purportedly dated 29.03.2024 (issued by ITO Ward 23(3) Delhi), as same is issued without any application of mind;
C) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being based on invalid jurisdictional notice u/s 148 purportedly dated 29.03.2024 unlawfully issued by ITO Ward 23(3) Delhi as same is issued in violation of pecuniary jurisdiction specified in CBDI instruction 1/2011 dated 31.01.2011 Jurisdiction to issue notice lies with concerned ACIT/DIT for returned income in corporate assessee of above RS 31,49,323 and not ITO)
D) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being based on invalid transfer order passedu/s 127;
E) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being based on invalid /mechanical sanction u/s 148(expl 2 clause iv), which is merelyon order sheet (19.03.2024) and is without application of mind;
F) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being based on invalid /mechanical sanction u/s 151 dated 29.03.2024 (being unsigned on face of it and it is also without application of mind;
G) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 when there is no valid satisfaction recorded vide expl 2 clause (iv) of sec 148 of 1961Act
H) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 without valid disposal of assessee's detailed jurisdictional objections filed during assessment proceedings;
I) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 which is without supply of any relied upon material and relevant statement as referred in impugned assessment orders;
J That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 which is in total violation of sec 65B of evidence law and the binding chat digital evidence manual ;
K) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147/143(3) being based in invalid approval u/s 148B of the Act (dated 09.03.2025);
L That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being passed in total violation of principles of natural justice as evident from the admitted fact that assessee has not been confronted with complete relied upon material & neither opportunity of cross examination has been provided despite repeated & specific requests made in this regard.
M) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 being passed in abdicated manner without independent application of mind;
N) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not deleting the impugned addition arbitrarily sustained u/s 68/69C to the extent of Rs 84,98,985 u/s 68, as same was made without application of mind to the admitted factual position of the case and without any supporting basis for the same.
O) That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not quashing the impugned assessment order passed u/s 147 as there is total lack of valid Show cause notice (SCN) thus vitiating the impugned assessment framed u/s 147;
At the outset, the ld. Counsel for the assessee submitted that it has raised legal grounds A to G concerning invalidity of issue of notice u/s 148 on account of jurisdictional insufficiency and that the same be adjudicated first in preference to its other grounds of appeal qua merits of addition, etc. It was submitted that the impugned legal grounds strike at the root of the matter. Accordingly, we have decided to adjudicate the said grounds of appeal first.
Brief factual matrix of the case as culled out from the order of the lower authorities is that the Return declaring income of Rs.31,49,323/- was filed on 01.11.2019. The ld. Assessing Officer had received information that the assessee was a beneficiary of accommodation entry from Shri Deepak Agarwal and Shri Himanshu Verma of Galaxy Group of cases, in respect of whom search u/s 132 was conducted on 17.11.2021. The ld. Assessing Officer being ITO, Ward-23(3), New Delhi, issued notice u/s 148 dated 29.03.2024. During the course of assessment proceedings, the ld. Assessing Officer noted that the assessee had taken loans from companies namely M/s Arti Securities and Services Ltd., Attractive Capital Service Pvt. Ltd., M/s Covet Financial Services Pvt. Ltd., M/s Mysore Finlease Pvt. Ltd. and M/s Saivi Finance Pvt. Ltd. It was noted that these were non-descript controlled by Shri Deepak Agarwal and did not engage in any genuine business. Accordingly, relying upon the enquiries conducted by Investigation Wing, the ld. Assessing Officer proceeded to add the loan amount of Rs.8,10,00,000/- from the above companies’ u/s 68 of the Act. The ld. Assessing Officer further added an amount of Rs.24,30,000/- u/s 69C of the Act being 3% of the loan amount as unexplained commission expenditure. The ld. CIT(A) concurred with the findings of the ld. Assessing Officer and confirmed the impugned addition. The appellant is contesting the impugned order of ld. CIT(A).
We have heard rival submissions in the light of material placed on records.
The ld. Counsel for the assessee submitted that the impugned assessment order suffers from various serious jurisdictional insufficiency qua issuance of notice u/s 148 of the Act. It is the case of the assessee that the notice u/s 148 was issued by ITO, Ward-23(3), whereas, since the Returned Income was above Rs.30 lakhs, the pecuniary jurisdiction was lying with concerned AC/DC. Thus, notice u/s 148 was stated to be invalid. Reliance in this regard was placed upon CBDT Instruction No.01/2011, dated 31.01.2011. The ld. Counsel has further argued that the notice u/s 148 is vague and mechanical and that on identical facts, notices have been struck down by the Tribunal. It was further argued that the satisfaction note was recorded without application of mind and there was absence of any live nexus between the escapement of income and the material on records. In support of his contentions, the ld. Counsel has placed reliance upon a catena of judicial precedents of this Tribunal as well as of Hon’ble jurisdictional High Court, Bombay High Court, Gujarat High Court and other Co-ordinate Benches of other Tribunals.
On the issue of notice u/s 148, issued by ITO as against AC/DC, reliance has been placed upon the decision of this Tribunal in the case of Kshitiz Sachdeva ITA No.6133/Del/2025 holding that “Now CBDT instructions No. 1 of 2011 dated
31.01.2011 provide that in case of metro cities income declared by individuals is above Rs.20,00,000/- in those circumstances Deputy Commissioner/Assistant Commissioner has power of assessment. Thus, in case of assessee as the income declared was less that Rs. 20,00,000/- the power vested with Income Tax Officer only. Therefore, issuance of notice u/s 143(2) of the Act for assumption of jurisdiction of assessment to be completed u/s 143(3) by ACIT, Circle 41(1) is vitiated.”
Further, it was submitted that another bench of this Tribunal in case of Heritage Lamps in its order dated 18.02.2026 has held that “It is further observed that as per CBDT instruction No. 1/2011 dt. 31.1.2011, the territorial jurisdiction over the assessee lies with the ITO as the income of the assessee was below Rs. 20.00 lacs. It is an admitted position that in the present case, the notice u/s 148 was issued by the AO who was not having jurisdiction over the assessee thus, the reassessment order passed on wrong assumption of jurisdiction in the case of assessee is invalid”
Similar view was reported to be taken in Arjun Rishi as at 176 taxmann.com
720 (Del. Trib.) holding that “Considered the rival submissions and material placed on record. We observe that assessment was completed by the Assessing Officer, Ward 28 (1), Delhi vide order dated 30.12.2019. We observe that as per the CBDT Instruction No.1/2011 dated 31.01.2011 u/s 119 of the Act in the present case, the assessee has declared an income of Rs.91,05,020/- and as per the Instruction, income upto Rs.30,00,000/- is with the ITOs and anything above Rs.30,00,000/-, assessment has to be completed by ACs/DCs. In the given case, we observed that as per the income declared by the assessee, the jurisdiction falls under ACs/DCs… we observe that actual jurisdiction lies with ACs/DCs and it is beyond the jurisdiction of ITOs. Therefore, notice u/s 143(2) to assess the income of the assessee is beyond the jurisdiction of the ITO. Therefore, the jurisdiction notice u/s 143(2) is bad in law and accordingly even assessment order passed with wrong jurisdiction is bad in law.”
The ld. Counsel submitted that the notice u/s 148 dated 29.03.2024 and the satisfaction note dated 29.03.2024 extracted hereinbelow is vague and without any application of mind.
The ld. Counsel argued that Hon’ble Delhi high court in case of PKS BUILDMART PVT LTD vs ITO W.P.(C) 6751/2023 (19.05.2023) has on identical facts held as under:-
“12.1We would assume that the notice, along with the annexure stands withdrawn. The reason that we have reached this conclusion is that the third notice which is dated 31.03.2023, which was issued under Section 148 of the Act, simply states as follows: “I have information that a search was initiated under Section 132 of the Act in your case or in the case of the person in respect of which you are the assessable under the Act on the date 17.11.2021.” 13. In the notice, there is no clue as to who is the person who was searched, which resulted in triggering the reassessment proceedings against the petitioner. The notice, to say the least, is vague. 14. In these circumstances, we are inclined to allow the writ petition and quash the impugned notices.”
Further, it was stated that again on identical facts a Co-ordinate Bench of this Tribunal in the case of Optus Developers Pvt. Ltd. vs. ACIT, CC-32 ND reported in (2026) 1TMI 1037 (ITAT Delhi.) has held as under.
“2.Hearing both the sides we find that the assessee now questions the notice u/s 148 dated 31.03.2023 alleging same is outcome of non application of mind and for that as a matter of fact we find that in the notice AO mentioned. “I have information that a search was initiated under section 132 of the Act in your case or in the case of the person in respect of which you are the assessable under the Act on the date 17/09/2021. This notice is being issued after obtaining the prior approval of the PCCIT, Delhi accorded on date vide Reference No. 100000038640175.
3.Undisputedly and admittedly present case is of non-searched case (third party case) so when reopening u/s 148 of the Act is made directly on non-searched person same has different nature and has scope is to be strictly. As evident from cursory look to notice u/s 148 it is totally without application of mind as it is stated assessee is searched and non searched person both. As the impugned assessment order passed u/s 147/144 of the Act is considered we find that the assessment is conclude referring to some search action u/s 132 on Deepak Aggarwal and Mukesh Kumar dated 17.12.2021, and there is no mentions to how this search is related to search dated 17/09/2021 referred in the impugned notice. This thus leaves no doubt in the mind of this bench that impugned notice is outcome of utter casualness and not just non-application of mind. Corresponding ground deserves to be sustained.”
Further, the ld. Counsel drew our attention, on the issue, to the decision of this Tribunal in case of Vintage Distelleries Ltd vs DCIT ITA Nos.6435 to 6440/Del/2025 (17.04.2026) has held as under:
“From the perusal of the above observations made in the notice issued u/s 148 of the Act, it is clear that AO while reopening the assessment was not sure whether the assessee is the person searched or the other person whose documents were fund from the person searched. It is undisputed fact that search action u/s 132 of the Act was carried out in the case of Vintage Group on 11.05.2024 and assessee being the member of such group its business premises was also covered under the search u/s 132 of the Act. However, in the notice issued u/s 148, the Assessing Officer was not clear whether the reopening u/s 148 is made in the case of person searched or in case of non-searched person. Thus, the notice u/s 148 of the Act is ambiguous and issued without application of mind and, therefore, the said notice is invalid and be quashed. …As observed above, facts of the case of the assessee are identical to the facts in the case of Optus Developers Pvt. Ltd. vs. ACIT (supra). In the instant case, the AO while reopening the assessment in the notice u/s 148 it has not clarified whether it is issued for the person searched and in the case of other person as could be observed from the notice issued u/s 148 of the Act. In the light of the above discussion and by respectfully following the judgement of Co-ordinate Bench in the case of Optus Developers (supra), we hold that the notice issued u/s 148 in casual manner, without application of mind and thus is bad in law and is in valid and accordingly the grounds of appeal Nos. 1 to 3 of the assessee are allowed”
The ld. Counsel further submitted that the Notice u/s 148 are without any valid satisfaction or the deemed escapement postulated in Explanation-2 of Section 148 of the Act. It was submitted that the satisfaction u/s 148 and consequent approval u/s 151 are based upon vague, irrelevant and non-specific basis lacking a live nexus with the material on records. The ld. Counsel drew our attention to the decision of Hon’ble Gujarat High Court in the case of Sandhya Maulik Patel 181 taxmann.com 123 as under:-
“13.Thus, the AO in his satisfaction has positively recorded that he ascertained from the “public domain” that the said land was purchased by the petitioners. The AO presumed that since the seller entered into the MoU for Rs.39,32,25,000/-, he could not have entered into a sale with the petitioners for Rs.12,00,00,000/-without receiving on-money. The MoU found from mobile images shared between Dilip Patel, Ashok Atmaram Patel (proposed seller)and Dhiren R. Bharwad (proposed purchaser) disclosed the sale of Survey No.329 for Rs.39.32 crores. The searched person, i.e. the broker, in his statement before the AO asserted that he did not broker the land deal and only supplied 7/12 Form and Form No.6 showing land entries post search. Thus, these forms were not seized during the search but were handed over by the broker to the AO post search. After these were supplied, the AO obtained the sale deed information from the public domain. It is pertinent to note that there was no incriminating material found during the search having a nexus with the petitioners. Thus, the information/documents collected by the AO from the broker or seller cannot be said to create a live link involving the petitioners, and the presumption of escaped assessment based on the difference between Rs.39.32 crores and Rs.12 crores is unsustainable.
14.In the present case, the search conducted against Shri Dhaval Teli (searched person) did not yield any document relating to undisclosed income “relating to” or “pertaining to” the petitioners. Hence, the satisfaction recorded by the AO roping the petitioners into assessment proceedings on the basis of digital data impounded during the search, which has no nexus with the petitioners, is required to be quashed and set aside. Thus, the Assessing Officer has acted de hors the provisions of Section 153C of the Act. Reliance placed by the Revenue on the judgement of the Apex Court in Vikram Sujitkumar Bhatia (supra) does not assist them, since the issue before the Apex Court pertained to the applicability of the amendment brought to Section 153C by the Finance Act,2015 to searches conducted before 01.06.2015.”
Similarly, attention was also invited to decision of Hon’ble Gujarat High Court on the issue of deemed escapement provided under Explanation-2 of Section 148 postulated in the case of Naliniben Jagdishkumar Gandhi v. ITO [2025] 183 taxmann.com 126 (Gujarat).
“Except the seized documents as mentioned herein-above, and the statements of the searched person Shri Bavadiya, there is no material recorded by the Assessing Officer which would reveal the name of the petitioner. It is true that cash transactions operate in very clandestine manner, and the re-assessment cannot be quashed, but the revenue has to prove a live link connecting the assessee
10.Except the seized documents as mentioned herein-above, and the statements of the searched person Shri Bavadiya, there is no material recorded by the Assessing Officer whichwould reveal the name of the petitioner. It is true that cash transactions operate in very clandestine manner, and the reassessment cannot be quashed, but the revenue has to prove a live link connecting the assessee. The only link is the survey number of the petitioner. It is pertinent to note that the date of the seized document referred is of 11.08.2017 and it is the case of the Assessing Officer that the entire plot of land was sought to be sold at the rate of Rs.17,000/-per square yard in the year 2017 as per the entry made in the register (seized document). Hence in absence of any independent corroborative material linking the present petitioner with the alleged - on money transaction, we are inclined to quash and set aside the impugned notice dated 30.03.2025”
The ld. Counsel also drew our attention to the decision of Hon’ble Gujarat High Court in the cases of 1) Trupti Aakash Desai versus Income Tax Officer ward 3(3)(5), Ahmedabad 2) Kantilal Parsotamdas Patel versus income tax Officer, Ward 5 , Mehsana (08.04.2026) in Special Civil Application no.985 of 2026 & Special Civil Application no.3676 of 2026 holding that "It is true that the cash transactions are done in a clandestine manner using coded script, however, the revenue, before re-opening the assessment has to establish a live link of the assessee on the basis of seized material only. The expression “ relates to” and “pertains to” used in Clause(iv) to Explanation 2 to Section 148 of the Act cannot be used in vacuum. The revenue after the seizure of incriminating material is under an obligation to analyze such material, in light of attendant circumstances and record relevancy and a prima facie opinion linking such material establishing escapement of income at the hands of the assessee. The information which is derived from the incriminating material in the instant case, does not establish live-link. The information is absolutely vague and unspecific and the rate of Rs.35,000/- is attempted to be imposed upon the petitioner retrospectively to the sale deed registered on 28.08.2018. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link of the petitioner with ‘ Dhaval Patel Krish’ whose name is found in the loose paper. There is no link, even remotely, found with Safal Group or City Estate Management. The land in question is subsequently sold by the petitioner and converted to NA. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment. 7. Hence, in our opinion, the provision of Section 148 of the Act will not get attracted in the present case, in such circumstances. Hence, the impugned action of re-opening of the assessment vide notice dated 29.3.2025, issued by the respondent under Section 148 of the Act is required to be quashed and set aside. We are conscious about the legal precedent as set out by Page 8 the Supreme Court. At the stage of notice of re-opening of the assessment, albeit, the Court cannot go into the sufficiency of evidence, however, simultaneously the Court has to examine the aspect as to whether there is even prima-facie some material, which could enable the department to reopen the assessment. In the present case, the reopening is based on a vague, irrelevant, and non-specific information, and that too, applying the same retrospectively to the sale deed of the petitioner and also on the land which has been subsequently converted from Agriculture to Non-agriculture land by the individuals who have bought the lands from the petitioner. Hence, we are inclined to quash the action of the revenue seeking re-opening of the assessment.”
The ld. Counsel for the assessee submitted that the facts of the present case are identical to those discussed in judicial precedents hereinabove and accordingly requested to quash the notice u/s 148 and the consequent assessment order dated 28.03.2025.
The ld. DR vehemently argued in favour of the order of lower authorities. The ld. DR however could not distinguish the facts of the present case with the cited judicial precedents which were submitted by the Ld. Counsel for the assessee through his paper book filed during the hearing.
We have noted that the facts of the present case, as discerned from records extracted hereinabove, qua issue of notice u/s 148 by an ITO level officer as against an AC/DC level Officer, issue of deemed escapement and lack of live nexus is akin to those in the judicial precedents relied upon by the ld. Counsel for the assessee. Accordingly, we quash the notice u/s 148 dated 29.03.2024 and the consequent assessment order dated 28.03.2025 and allow the legal grounds of appeal raised by the assessee vide grounds of appeal Nos. A to G are allowed.
As we have allowed grounds of appeal no. A to G, all other grounds of appeal raised by the assessee from H to O have become academic in nature and hence left open.
In the result, the appeal of the assessee is allowed.