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Judgment
PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:
The appeal in ITA No.6277/Del/2026 for AY 2024-25, arises out of the order of the Id. Commissioner of Income Tax (Appeals)-23, Delhi [hereinafter referred to as 'Id. CIT(A)', in short] dated 22.05.2026 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 25.03.2026 by the Assessing Officer, ACIT, Central Circle-2, New Delhi (hereinafter referred to as 'Id. AO').
The Ground Nos. 4 and 5 raised by the assessee were stated to be not pressed by the Learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.
The Ground Nos. 1, 2, 3, 6, 7, 8, 9, 10 and 11 raised by the assessee are challenging the addition made in the sum of Rs 6 crores under section 68 of the Act. The interconnected issue involved therein is challenging the addition of Rs 6 lakhs on account of alleged commission expenditure under section 69C of the Act.
We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2024-25 was filed by the assessee on 3-12-2024 declaring total income of Rs 23,64,740. A survey action was conducted under section 133A of the Act on 12-12-2023 on entities controlled by one Shri Joginder Pal Gupta, an alleged accommodation entry operator. During survey, statements of Shri Joginder Pal Gupta and his key associate Shri Raju Malik were recorded on oath under section 131(1A) of the Act wherein both categorically admitted to being in the business of providing accommodation entries in the form of unsecured loans by charging a commission of 0.25 percent of the gross transaction amount. They further admitted that the entities controlled by them have no actual business and are mere shell companies used solely for providing accommodation entries.
The assessee during the year under consideration received unsecured loans from Anuj Buildcon Private Limited in multiple tranches between 29-9-2023 and 31-10-2023 aggregating to total amount of Rs 6 crores. This entity was stated to be an entity controlled by Sri Joginder Pal Gupta. This receipt of sum of Rs 6 crores was sought to be treated as accommodation entry received by the assessee. The assessee in order to prove the veracity of the loans submitted that the transactions were carried out through regular banking channels and furnished PAN, audited financial statements, bank statements, loan agreement and balance confirmation from the lender. The assessee in response to show cause notice issued by the learned AO also sought for cross examination of Shri Joginder Pal Gupta as the said lender entity had duly confirmed before the learned AO the entire loan transactions carried out with the assessee to be genuine in response to notice issued under section 133(6) of the Act. Hence, the learned AO had on one hand statement of Shri Joginder Pal Gupta recorded during survey and on the other hand response received in under section 133(6) of the Act from the lender company Anuj Buildcon Private Limited, wherein they have confirmed the loan transaction with the assessee to be genuine. Since these were contradicting each other, the assessee sought cross examination of Shri Joginder Pal Gupta which was denied by the learned AO. The learned AO ignoring the entire contentions of the assessee and the documents placed on record by the assessee coupled with direct confirmation given by the lender company in response to notice under section 133(6) of the Act proceeded to treat the receipt of Rs 6 crores as accommodation entry and made an addition under section 68 of the Act. Since the said receipt was treated as accommodation entry, an alleged commission expenditure of Rs 6 lakhs was also sought to be added under section 69C of the Act by the learned AO in the assessment. This action of the learned AO was upheld by the learned CITA.
The Learned AR submitted that statements of Shri Joginder Pal Gupta and Shri Raju Malik have been selectively quoted by the Learned AO. In their statements, the name of the assessee or the alleged accommodation entry transaction carried out by the assessee have not even been remotely mentioned. Certain transactions on the basis of alleged data from the mobile phones of Shri Joginder Pal Gupta and Shri Raju Malik have been referred and relied upon by the Learned AO. These referred and relied transactions have undisputably no relation whatsoever with the transactions carried out by the assessee. Certain evidences in the form of alleged Kachcha Parchis have also been mentioned. In these Kachcha Parchis also, no transactions whatsoever pertaining to the assessee have been mentioned. Hence, the entire reliance placed by the revenue are totally misconceived and misplaced. The Learned AO has submitted further that the Learned AO had mechanically reproduced a table apparently prepared by the investigation wing on the basis of duly disclosed bank account identifying certain transactions carried out by the assessee with Anuj Buildcon Private Limited. No evidence or statement whatsoever behind the presumption that these transactions are accommodation entries were referred or relied upon by the Learned AO. It was pointed out by the Learned AR that during the course of assessment proceedings, the Learned AO issued notice under section 133(6) of the Act to Anuj Buildcon Private Limited where the loan transactions were duly confirmed by Anuj Buildcon Private Limited on 19-12-2025. The loan agreement between the assessee and Anuj Buildcon Private Limited was also directly shared by the lender company before the Learned AO. This confirmation and response to notice under section 133(6) of the Act, wherein the entire transactions have been duly confirmed, had been completely ignored by the Learned AO while framing the assessment. The assessee sought for cross-examination of Shri Joginder Pal Gupta before the Learned AO which was also totally denied. Denial of cross-examination would amount to violation of natural justice and any statement relied upon by the revenue which were taken behind the back of the assessee and which were not put for cross-examination by the assessee would have no evidentiary value and such statement should be ignored at once. Reliance in this regard was placed on the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries vs CCE reported in 62 taxmann.com 3 (SC). The Learned AR also placed reliance on the coordinate bench decision of Jaipur Tribunal in the case of Sunitha Dhadda vs DCIT reported in 33 taxmann.com 639 for the principle that denial of cross-examination of the person to an assessee would amount to gross violation of principle of natural justice and any addition that has been made based on the statement of a person who has not been cross-examined would not have any legs to stand in the eyes of law. The Learned AR further submitted that this decision of Jaipur Tribunal had been upheld by Hon’ble Rajasthan High Court subsequently which is reported in 100 taxmann.com 525. The Special Leave Petition preferred by the revenue against this judgement has been dismissed by the Hon’ble Supreme Court which is reported in 100 taxmann.com 526.
The learned AR further submitted that the present assessment framed on the assessee is a regular assessment for the Assessment Year 2024-25. No search or survey action was carried out on the assessee herein. The assessee has been regularly filing his income tax returns for all the years. For the year under consideration, he had filed his regular return and his case was selected for scrutiny by CASS and consequentially regular assessment was framed under section 143(3) of the Act on 25-3-2026. While this is so, there is absolutely no requirement for the learned AO to have discussions with the range head viz Additional Commissioner of Income Tax, Central Range-1, New Delhi from time to time and obtain his prior approval before framing the regular assessment. This fact is clearly mentioned in para 12 page 29 of the assessment order. This action of obtaining prior approval of the Additional Commissioner (Range head) vitiates the entire assessment proceedings itself. In support of this contention, the learned AR placed reliance on the decision of the Hon’ble Punjab & Haryana High Court in the case of FinDoc Finvest Private Ltd vs DCIT reported in 481 ITR 58 (P&H).
The Learned DR vehemently relied on the CBDT Circular in F No. 299 / 36/2021 –Dir (Inv.III) /577 dated 15-07-2022 wherein it mandated that the assessing officer in central circle charge should have to pass all orders under section 143(3) or section 144 of the Act only after obtaining the prior approval of Additional Commissioner or Joint Commissioner. Accordingly, she pleaded that the assessment order being passed after getting the prior approval of the learned Additional Commissioner of Income Tax, Central Range cannot be questioned by the assessee as the learned AO in the instant case had followed the CBDT Circular dated 15-07-2022.
In this regard, we find that CBDT instructions / circulars / notifications are meant only to guide the assessing officers to frame a particular assessment in accordance with law. Hence, the said instructions /notifications / circulars issued by CBDT are binding on the revenue, but not on the assessee as long as it is not beneficial to the assessee. Certainly, those instructions / circulars / notifications issued by CBDT are not binding on the courts. Further, any instruction /circular / notification issued by CBDT cannot be contrary to the provisions of the Act. The Income Tax Act mandates an assessing officer to frame an assessment after getting prior approval of the Additional Commissioner under certain specific circumstances. Wherever such specific circumstances are provided or warranted, the Act itself specifically provides for the same, like in search cases. For a regular assessment being framed, there is no requirement provided in the Act to obtain prior approval of the Additional Commissioner or Joint Commissioner. In the instant case, the assessment framed is a regular assessment and hence, there was absolutely no requirement for the learned AO to obtain prior approval of the Additional Commissioner even though assessment is framed by an assessing officer in the Central Charge. Hence, we hold that the Circular dated 15-07-2022 relied upon by the learned DR heavily is contrary to the provisions of the Act. We find that the said circular dated 15-07-2022 had been duly considered by the Hon’ble Punjab (0:06) and Haryana in the case of FinDoc Finvest P Ltd vs DCIT reported in 481 ITR 58 (P&H). The relevant operative portion of the said judgement of Hon’ble Punjab & Haryana High Court is reproduced below:-
“20.As regards Section 119 of the Act as noticed above, we find that while Section 119(1) of the Act, restrains the Board from issuing any instructions to subordinate authorities, which may lay down instructions of such a nature requiring the Income Tax Authorities to make particular assessment in a particular manner or to interfere with the discretion of the Joint Commissioner and Commissioner (Appeals) while exercising their appellate function. However, the Board would be within its powers to instruct and lay down guidelines for efficient management of assessment work and collection of revenue or issue guidelines/principles/procedure which are to be followed by Income Tax Authorities for work relating to assessment. The Circular dated 15.07.2022, issued by the CBDT relied upon by the respondents directs the Assessing Officer to seek approval of the assessment made by him under Section 143 or 144 of the Act from the Joint Commissioner. The Circular dated 15.07.2022, cannot be objected to and comes within the ambit of powers available to the CBDT as above.
21.Although, the approval can be taken from the Joint Commissioner of the assessment order, the question arises that while examining the return and conducting assessment, can the Assessing Officer seek guidance or discuss the case with the Joint Commissioner and whether his consultation with the Joint Commissioner would amount to abdication of his powers. In Anirudhsinhji Karansinhji Jadeja case (supra), the Hon'ble Supreme Court was examining the issue relating to the powers vested with DSP by Section 20-A of the Terrorist and Disruptive Activities (Prevention) Act, 1987 and has observed as under:-
"11.The case against the appellants originally was registered on 19th March, 1995 under the Arms Act. The DSP did not give any prior approval on his own to record any information about the commission of an offence under TADA. On the contrary, he made a report to the Additional Chief Secretary and asked for permission to proceed under TADA. Why? was it because he was reluctant to exercise jurisdiction vested in him by the provision of Section 20A (1)? This is a case of power conferred upon one authority being really exercised by another. If a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If the discretion is exercised under the direction or in compliance with some higher authority's instruction, then it will be a case of failure to exercise discretion altogether. In other words, the discretion vested in the DSP in this case by Section 20A (1) was not exercised by the DSP at all.
12.Reference may be made in this connection to Commissioner of Police v. Gordhandas Bhanji, 1952 SCR 135, in which the action of Commissioner of Police in cancelling the permission granted to the respondent for construction of cinema in Greater Bombay at the behest of the State Government was not upheld, as the concerned rules had conferred this power on the Commissioner, because of which it was stated that the Commissioner was bound to bear his own independent and unfettered judgment and decide the matter for himself, instead of forwarding an order which another authority had purported to pass.
13.It has been stated by Wade and Forsyth in 'Administrative Law', 7th Edition at pages 358 and 359 under the heading 'SURRENDER, ABDICATION, DICTATION' and sub- heading "Power in the wrong hands" as below:-
"Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with some one else, or may allow some one else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them.....".
"Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....".
14.The present was thus a clear case of exercise of power on the basis of external dictation. That the dictation came on the prayer of the DSP will not make any difference to the principle. The DSP did not exercise the jurisdiction vested in him by the statute and did not grant approval to the recording of information under TADA in exercise of his discretion."
22.In SPL Siddhartha Ltd. case (supra), it was held that the procedure laid down under the Income Tax Act, has to be strictly followed. Thus, principally the law is settled as held in Nazir Ahmed v. King Emproer 1936 (BC) 253 (2), applying the principle of 'taylor v. taylor' Ch.D (431), that 'where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden, applied to Judicial Officers making a record under Section 164.'. Thus, as held in CIT v. Anjum M.H.Ghaswala 119 Taxman 352/252 ITR 1 (SC), by the Constitutional Bench that 'it is a normal rule of construction that when a statue vests certain powers in a authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statue itself. If that be so, since the Commission cannot exercise the power of relaxation found in Section 119(2) (a)in the manner provided therein it cannot invoke that power under Section 119(2)(a) to exercise the same in its judicial proceedings by following a procedure contrary to that provided in sub-section (2) of Section 119.'
23.Section 116 of the Act, defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise its powers in accordance with law in specified circumstances. Thus, the Assessing Officer would have to exercise its own discretion to reach a conclusion and would not be influenced by any other officer. In view thereto, we find force in the contention raised by the learned senior counsel for the petitioner that the concerned Assessing Officer was influenced by the consultation and discussion with his superior officers. In fact the order passed by the Assessing Officer appears to have been already prepared even before the reply was received as the consultations have been conducted on 26.10.2023, 11.01.2024 and 14.03.2024 by the Assessing Officer as mentioned by him in the order itself. Again after the reply was received and the order was passed by the Assessing Officer, the same has been approved by the Joint Commissioner. As such, we find that the Joint Commissioner has in fact comprehensively and actively participated in the making of the assessment order while his role was only limited to the approval of the assessment order in terms of the CBDT Circular. Thus, we find the order to be vitiated in law.
24.In view of the above, the assessment order cannot be result of an independent application of mind and exercise of discretionary power by the Assessing Officer in terms of Section 143(3) of the Act and but is an order passed under the influence and directions of the superior officers. It is to be noticed that the consultation with a superior officer would be akin to directions of the superior. There is no room available for discretion where consultation is sought from a superior officer while if a superior officer consults his subordinates, the discretion continues to stay with him. He may choose not to follow the advice of his subordinate but the opposite would be untrue. We are, thus, of firm view that the order has been passed whereby the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law. …………………
34.In view of the aforesaid discussion, the order of assessment is found to be non est and not sustainable in the eyes of law. Accordingly, order of assessment is quashed and set aside. Consequences thereof shall follow. Writ petition is allowed accordingly.
35.All pending misc. application(s) also stand dismissed.”
Similar view was taken by the co-ordinate bench decision of this Delhi Tribunal in the case of Chemical Agencies vs ACIT in ITA No. 7092/Del/2025 dated 29-07-2026. The relevant operative portion of the said order is reproduced below:-
“5.The ld. Counsel for the appellant assessee drew our attention to the findings recorded by ld. Assessing Officer on page-1 to 4 of the assessment order to conclusively drive home the point that the impugned assessment was arising out of survey proceedings u/s 133A and not any search proceedings u/s 132. The Id. Counsel preliminary contest to the impugned assessment order is that the same is void ab initio. It was argued that it is trite law that if an Assessing Officer is influenced in his decision making by any other authority, then his order cannot be treated as a valid order. To prove the point, the ld. Counsel drew our attention to para-10 of the Assessing Officer's order on page-8 recording as under:-
“...10. The order passes with the prior approval of Joint Commissioner of Income Tax, Central Range-8, New Delhi as accorded vide his office letter F.No.JCIT/CR8/153D/2021- 22/1276 dated 29.09.2021 ....."
6.The ld. Counsel vehemently argued that the said findings of the ld. Assessing Officer clearly alludes that there was intervention of the Joint Commissioner of Income Tax, Central Range-8, New Delhi in the assessment order and that as the same is not permissible and would constitute an interference in Assessing Officer's working, the assessment order dated 29.09.2021 has become non-est. The Id. Counsel argued that the assessee was subjected to a survey operation under Section 133A of the Income Tax Act on 31/10/2018, and not a search and seizure operation. The proceedings were initiated by issuing a notice u/s 143(2) and the assessment was framed u/s 143(3) of the Act. It was argued that the statutory mandate of obtaining prior approval under Section 153D is specifically restricted to assessments made under Sections 153A and 153C, which exclusively arise from search or requisition cases. There is absolutely no legal requirement or provision within the Act that mandates or permits the AO to obtain prior approval u/s 153D for an assessment framed under Section 143(3) pursuant to a survey u/s 133A. It was stated that the position is firmly established by the Hon'ble Supreme Court in the case of Chandra Kishore Jhav. Mahaveer Prasad 8 SCC 266, and it is a well-settled solitary principle that "if statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner". This principle was further reiterated by the Hon'ble Telangana High Court in Kankanala Ravindra Reddy Vs. ITO 156 taxmann.com 178, holding that doing a thing in a manner not provided under the law means "it would have no existence in the eye of law". By wrongfully invoking Section 153D for a Section 143(3) assessment, the AO has acted beyond statutory parameters, rendering the assessment invalid. It was argued that an act committed by a PART statutory authority contrary to the provisions of the law inherently causes prejudice to the assessee, entirely negating the need to prove any further specific or financial prejudice. The Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd Vs. ACIT 162 taxmann.com 225 Bom. HC) categorically dealt with this exact proposition, holding that "An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee". The Court ruled that all assessees possess a fundamental and indefeasible entitlement to be assessed strictly as per the law and by following the procedure prescribed by law. Therefore, when an authority proposes to take action without following due process, the said action itself results in a prejudice to assessee and there is no question of assessee having to prove further prejudice before arguing the invalidity of the action.
7.The Id. Counsel submitted that as held by the Hon'ble Apex Court in Tata Chemicals Ltd. v. Commissioner of Customs 2015] 58 taxmann.com 126 (SC), "there can be no estoppel against law," and something that is illegal cannot be converted into something legal simply because an authority chose to act outside its prescribed statutory parameters. Thus, obtaining an inapplicable approval is not just a harmless administrative redundancy; it is a fatal jurisdictional defect that legally extinguishes the assessment order, severely prejudicing the assessee by violating the rule of law. It was argued that it is also a case of abdication of Quasi-Judicial Powers and influenced by external dictation by the ld. Assessing Officer. In support of his contention, our attention was invited to the decision of the Hon'ble Punjab & Haryana High Court in the case of Findoc Finvest Private Limited vs Deputy Commissioner of Income Tax [2025] 172 taxmann.com 773 (Punjab & Haryana), holding that "where there is no provision, the order of assessment would be vitiated in law if the Assessing Officer consults or seeks approval of the assessment from his superior officers". In the said judgment, Hon'ble High Court held that an order passed under the influence and directions of superior officers would mean that "the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law" Further reliance was placed upon the decision of the Hon'ble Supreme Court in Anirudhsinhji Karansinhji Jadeja vs State of Gujarat 5 SCC 302 holding that if a statutory authority is vested with jurisdiction, they must exercise it according to their own discretion. If the discretion is exercised under the direction or in compliance with a higher authority's instruction, "it will be a case of failure to exercise discretion altogether" and constitutes an invalid "exercise of power on the basis of external dictation". The AO in the present case failed to bear his own independent and unfettered judgment, instead forwarding a draft assessment to the JCIT for validation.
8.The ld. DR placed reliance upon the decision of lower authorities. The fact of inscription placed by the ld. Assessing Officer in para-10 of his order (supra) could not be satisfactorily controverted.
9.It is trite law discussed in judicial precedents hereinabove that due process of law would mean compliance to the law as it is and that what is required to be done in the manner and fashion prescribed has to be accomplished accordingly. In the instant case, the ld. Assessing Officer was concluding an assessment proceeding as a sequel to survey proceedings u/s 133A. The law does not mandate the ld. Assessing Officer to seek any prior approval of any supervisory authority. Para-10 of the Assessing Officer's order (supra) clearly alludes that he had obtained the approval of his supervisory authority. The said act of the Assessing Officer is not supported by any provision of law. Thus, in view of the decision of the Hon'ble Punjab & Haryana High Court (supra), the same would constitute an act of interreference by the ld. Assessing Officer. Accordingly, we are of the considered view that in respectful compliance to the said decision of the Hon'ble Punjab & Haryana High Court (supra), the order u/s 143(3) dated 29.09.2021 cannot survive. We therefore set-aside the order of the lower authorities and quashed the assessment order u/s 143(3) dated 29.09.2021. The ground of appeal no.2 of the assessee is therefore allowed.”
In the aforesaid case, there was a survey action carried out on Chemical Agencies. Still the Delhi Tribunal held that there was no requirement of seeking prior approval of the Additional Commissioner for framing the assessment. The case before us is even more stronger in view of the fact that there was not even a survey action carried out on the assessee herein. It is a simple case of regular return filed by the assessee in normal routine manner and assessment being framed in a routine manner. Hence there is absolutely no requirement for obtaining prior approval of Additional Commissioner, Central Range (Range head) for framing a regular assessment.
We find that there is no provision in law for approval of the Additional Commissioner while passing the regular assessment order under section 143(3) of the Act. It is settled law that the power under the Act is required to be exercised by the authorities bestowed with the relevant power. Respectfully following the decision of Hon’ble Punjab and Haryana High Court and decision of Delhi Tribunal referred supra, the assessment order passed by the learned AO in the instant case becomes bad in law and is hereby quashed.
Since the assessment is quashed in the abovementioned terms, the adjudication of other grounds raised by the assessee on merits become academic in nature and they are left open.
In the result, the appeal of the assessee is partly allowed.