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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the Assessee is directed against the order dated 31.01.2026 of the Commissioner of Income Tax (Appeals)-30, New Delhi-110055, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment order dated 31.03.2025 passed under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by Assessing Officer, ACIT, Central Circle-32, New Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2020-21.
The Assessee has raised the 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 31.03.2024 as same is issued without any application of mind (based on explanation 1 to sec 148 and order u/s148A(d) , same is contrary to stipulation made in impugned assessment order at para 3 page 2 on stated/purported invocation of explanation 2 to sec 148of 1961 Act.
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 31.03.2024 in turn based impugned arbitrary /perverse order passed u/s 148A(d) DATED 31.03.2024; on
i)Firstly, entire order u/s 148A(d) is based on facts/figures of AY 2017-2018 whereas present case is of AY 2020-2021
ii) Secondly alleged income escaping assessment is quantified in order u/s 148A(d) at Rs 77,10,000 whereas in assessment order para 2 amount of escapement of income for present AY 20-21 is stated to be Rs. 5,00,85,963/-This shows total lack of application of mind at all stages on part of Ld AO and Ld PCIT(approving authority).
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 order/notice u/s 148A(d)/148 DATED 31.03.2024 which is without supply of relevant sanction/approval if any u/s 151 as mandated in CBDT guidelines u/s148A;
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 order/notice u/s 148A(d)/148 DATED 31.03.2024 without supply of relied upon material at any stage qua alleged escapement;
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 order/notice u/s 148A(d)/148 DATED 31.03.2024 dehors explanation 2 to sec 148 of 1961 Act;
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 being based on invalid transfer order passed u/s 127;
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 which is without supply of any relied upon material and relevant statement as referred in impugned assessment orders;
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 in total violation of sec 65B of evidence law and the binding cbdt digital evidence manual;
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 being based in invalid approval u/s (dated30.03.2025); 148B of the Act
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 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.
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 abdicated manner without independent application of mind;
M)That Ld CIT-A vide impugned order passed us 250 of the Act (1961 Act) erred in not deleting the impugned additions arbitrarily sustained as same was made without application of mind to the admitted factual position of the case and without any supporting basis for the same.
N) 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;”
Brief facts are that the assessee filed return for A.Y. 2020-21 on 31.12.2020 declaring an income of Rs. 3,98,76,680/-. Information was flagged on the Insight Portal of the Department regarding accommodation entries taken by the assessee from the Galaxy Group and others on which a search action u/s 132 of the Act was carried out on 17.11.2021 by the Investigation Wing. On the basis of information available, the AO noted that the assessee had made following transactions with the entry provider Shri Deepak one of the searched entities during the relevant assessment year: -
Accordingly, a show-cause notice u/s 148A was issued on 17.12.2025 requiring to assessee to explain as to why the aforementioned amount of Rs. 5,00,85,963/- should not be deemed as income that had escaped income for A.Y. 2020-21. After considering the assessee replies dated 15.02.2024 and 26.03.2024, the AO passed an order u/s 148A(d) of the Act on 31.03.2024 and also issued a notice u/s 148 on the same date. Subsequently, the assessment was completed vide order u/s 147 dated 31.03.2025 at assessed income or Rs. 3,98,76,680/-, after making various additions.
Aggrieved, the assessee preferred an appeal before the CIT(A), raising several legal grounds as well as grounds on merits. Vide order dated 31.01.2026, the assessee’s appeal was partly allowed by the CIT(A) and, therefore, the assessee has filed further appeal before the Tribunal.
Before us, the Ld. AR has pointed out that several legal grounds pertaining to the reopening have been raised, besides the grounds on merits which may be taken up first.
We, therefore first, take up the ground no. C pertaining to invalid notice u/s 148 based on factually incorrect order u/s 148A(d) of the Act as the same was passed on facts and figures pertaining to A.Y. 2017-18 relevant to F.Y. 2016-17.
It has been argued by the Ld. AR that, at the time of issuing of show cause notice u/s 148A of the Act, the Ld. AO had given opportunity to the assessee to explain the transactions amounting to Rs. 5,00,85,963/- undertaken with Shri Deepak Agarwal during F.Y. 2019-20. However, after considering the assessee’s submissions, at the time of passing the order u/s 148A(d), the AO recorded the reasons for escapement of income as under:
“6.As per the provisions sub-section (b) of section 148A, before issuing notice u/s 148 of the I.T. Act, an opportunity of being heard was provided to the assessee by issuance of show cause notice. ……………..
7.Thus, it is logical to conclude that the assessee has no proper explanation with respect to the above-mentioned escapement of income in its case for AY 2017-18. It is pertinent to mention here that the above income earned during the relevant financial year has escaped assessment and is liable to be added to the total income of the assessee for the AY 2017-18.
7.1From the above, it is evident that the assessee had not truly and fully disclosed material facts necessary for its assessment for the year under consideration thereby necessitation re-opening under section 147 of the Act.”
Ld. AR has argued that in view of the fact that details pertaining to A.Y. 2017-18 have been incorporated in the order for A.Y. 2020-21 dated 31.03.2024, it is clear that the reasons recorded and the notice issued are based on different facts. It has been submitted by the Ld. AR that there was no application of mind either by the AO or by the PCIT granting approval for order u/s 148A(d) of the Act, due to which the entire proceedings deserve to be quashed.
Ld. DR, on the other hand has strongly relied upon the orders of the authorities below.
5 We have heard the rival submissions and perused the material available on record. From the copies of the order u/s 148A(d) of the Act and the show-cause notice dated 17.02.2025, it is clear that while the initial notice was issued based on the facts related to A.Y. 2020-21, the order u/s 148A(d) was passed on the basis of facts pertaining to A.Y. 2017-18. We are of the considered view that the order u/s 148A(d) and the consequential notice u/s 148 were issued on the basis of incorrect facts and, therefore, these are liable to be quashed.
Since the entire proceedings have been quashed, the other legal grounds as well as the grounds on merits have become academic and, therefore, are not being adjudicated upon.
In the result, appeal of the assessee is allowed.