TaxTMI 
TaxTMI 
2026 (1) TMI 1674
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.... case of Shri Anand Jain and Shri Naresh Jain Group of cases on 17.12.2015 and further survey action was carried out at the business premises of the assessee and his family, that assessee is one of the beneficiaries of accommodation entries provided by Jain brothers. Accordingly, after recording the reasons, case of the assessee was reopened u/s 147 of the Act. After considering the submissions made by the assessee reassessment order was passed wherein the AO has made the additions of Rs. 1,13,96,698/- towards the unsecured loans of Rs. 42,20,000/- received from M/s CVH Sea Lives Ltd., M/s Purus Marketing Pvt. Ltd. & M/s Uanan Sales Pvt. Ltd. and further addition of Rs. 71,76,698/- is made towards the bogus purchases. In first appeal, ld. CIT(A) confirmed the action of ld. AO and dismissed the appeal of the assessee. 3. Aggrieved by the said order, assessee is in appeal before the Tribunal by taking following grounds of appeal: 1. On the facts and circumstances of the case, the CIT(A) has erred in confirming the action of the AO in issuing notice u/s 148 and assumption of jurisdiction u/s 147 in absence of condition precedent for assumption of jurisdiction, the order pa....
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....34 (Delhi). 3. On the facts and circumstances of the case, Ld. A.O. has erred both on facts and in law, in making assessment at an income of Rs. 1,30,46,970/-as against income of Rs. 14,22,340/- declared by the appellant 3.1. On the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the addition of Rs. 42.20,000/- on account of alleged bogus unsecured loan being accommodation entries despite the fact that Appellant has substantiated the genuineness and creditworthiness of the lender/creditors and the same was accepted during the original assessment under Section 143(3) of the Act. 3.2. On the facts and circumstances of the case, the CIT(A) erred in upholding the addition of Rs. 42,20,000/- on account of alleged bogus unsecured loan raised during the relevant AY without taking considering the Appellant's contention that the alleged unsecured loan accepted and repaid during the relevant A. Y was of Rs. 28,00,000/- only. 3.3. On the facts and circumstances of the case, the CIT(A) erred in upholding the addition of Rs. 42,20,000/- made on account of alleged bogus unsecured loan under Section 690 on the basis of third party sta....
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....w-cause notice for the enhancement. 6. On facts and in law, the Ld. AO has erred in passing the order u/s 147 r.w.s 143(3) without jurisdiction sans jurisdictional conditions of Section 153 of the Act. 6.1. On facts and in law, the Ld. AO has erred in passing the order u/s 147 r.w.s 144 without complying with the procedure prescribed under Section 153C of the Income Tax Act. 7. On the facts and circumstances of the case, the AO has erred both on facts an in law in making the additions on account of commission paid of 2.27.934/-being 2% on Rs. 1,13,96,698/- alleging as commission paid against accommodation entries. 7.1 On the facts and circumstances of the case, the CIT(A) erred in upholding the addition made by the AO in conjecture and surmises without there being any direct adverse material against the assessee, based only on suspicion 7.2 On the facts and circumstances of the case, the CIT(A) erred in upholding the addition made by the AO in the assessment order dated 08th December 2019 u/s 147 r.w.s. 143(3) without giving it an opportunity to rebut the same in violation of the principle of natural justice. 7.3. On the facts a....
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.... recorded by ld. PCIT. Ld. AR submits that from these facts, it is clear that AO has not made any independent application of mind and the case of the assessee was reopened u/s 147 of the Act in mechanical manner. Reliance is placed on the judgment of Co-ordinate Bench in the case of Nova Formworks Private Limited (Formerly known as Wonder Moldplast Private Limited) vs. ITO in ITA No.1724/Del/2020 dated 30.05.2025 and in the case of Seema Mehta vs. ITO in ITA No.2405/Del/2024 and requested that the notice issued u/s 148 deserves to be held as invalid and consequent reassessment proceedings deserves to be quashed. 5. On the other hand, ld. Sr. DR submits that a survey was carried on 17.12.2015 at the business premises of the assessee and during the course of original assessment proceedings, the information collected as a result of search and survey carried out were not available with the AO and, therefore, the same constituted fresh material unearth as a result of survey and accordingly, the proceedings initiated by the AO u/s 147 of the Act are valid proceedings. The Ld. Sr. DR further submits that from the perusal of the approval given and the reasons recorded it could be seen t....
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....copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for reopening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; (iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection an....
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....m under section 151 21. Evidently, the reassessment was first proposed internally on March 24, 2021 by the jurisdictional Assessing Officer, and was recommended by a Range Officer on March 25, 2021, and approved by the Principal Commissioner of Income-tax on the same day all under section 151 of the Act. Therefore, the reassessment has been contemplated and initiated one year after the expiry of four years from the end of the relevant assessment year d (2015-16). Therefore, failure by the petitioner to disclose material facts was a jurisdictional imperative, which was simply incapable of being discerned from the material on record. Therefore, we have no hesitation in holding that the Revenue's bid to initiate reassessment is unfounded and in direct conflict with section 147 of the Act. Therefore, the sanction for reassessment under section 151 could simply not have been given. 22. The requirement for sanction by a high-ranking official under section 151, is an inherent check and balance in the statutory scheme of the Act. Such officers are expected to apply their mind to the facts and the applicable law and then accord sanction. In the instant case, the propos....
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....aterial facts necessary for his assessment for that assessment year. In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was March 31, 1997 and from that date if four years are counted, the period of four years expired on March 31, 2001. The notice issued is dated November 5, 2002 and received by the assessee on November 7, 2002. Under these circumstances, the notice is clearly beyond the period of four years. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether t....
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....red to be arbitrary and devoid of valid reasons and, therefore, illegal; (B) Consequently, the order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 and all consequential proceedings in respect of the reassessment are hereby quashed and set aside." 26. Rule is made absolute in the aforesaid terms, and the writ petition is disposed of accordingly. There shall be no order as to costs." 11. The Hon'ble Delhi High Court in the case of SBC Minerals Pvt. Ltd. vs ACIT [2025] 475 ITR 360 (Del.) has held as under: - 10. "Before considering the merits of the contentions of the parties, it would be apposite to examine the relevant legal framework. 11. Section 151 of the Act, as it stood prior to the substitution by Act 13 of 2001 is reproduced hereunder: "151. Sanction for issue of notice .- (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner o....
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....rd "approved" by the Principal Chief Commissioner of Income- tax while granting approval under section 151 to the reopening under section 148 is not enough. While the Principal Chief Commissioner of Income-tax is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. Our opinion in this regard is fortified by the decision of the apex court in Union of India v. Mohan Lal Capoor. The grant of approval by the Principal Chief Commissioner of Income-tax in the printed format without any line of reason does not fulfil the requirement of section 151 of the Act. 16. We note that dealing with an identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in the case of the Pr. CIT v. Pioneer Town Planners Pvt. Ltd., wherein, we had held as follows (....
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....here literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the Income-tax Officer was to be agreed upon, the least which is expected is that an appropriate endorsement is made in this behalf set-ting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. Mohan Lal Capoor1 wherein it was observed as under: "27. We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said fo....
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.... section 148 of the Income-tax Act, 1961. Approved, had held that the said approval would only amount to endorsement of language used in section 151 of the Act and would not reflect any independent application of mind. Thus, the same was considered to be flawed in law." 12. In view of the above discussion, we hold that the assumption of jurisdiction in reassessment u/s 147 of the Act was invalid and vitiated consequently the order passed is hereby quashed. Ground of appeal No.1 to 1.6 are allowed. 13. Since, we have already allowed the assessee's legal grounds and quashed the reassessment order, the other grounds of appeal become academic thus not adjudicated. 14. In the result, the appeal of the assessee is allowed. Order is pronounced in the Open Court 16. 01. 2026. ============= Document 1 Form for recording of reasons for initiating proceedings u/s 147 of Income Tax Act,1961 and for obtaining the approval of the Addl. CIT/ Pr. CIT 1. Name and address of the assessee Sh. Anil Kumar Jain, 8-Y/9, Under Hill Lane, Near Parmanand Hospital, Civil Lines, New Delhi - 110054 2. PAN AAGPJ2715D . 3. Range/Circle Central Range-7 / Central Circle-26 4. Asst. year ....