Case Law Details
Aero Promoters Private Limited Vs DCIT Central (ITAT Delhi)
Summary: The ITAT Delhi held that the extended limitation under Sections 149(1)(b) and 149(1A) of the Income Tax Act could not be invoked by aggregating alleged unexplained expenditure arising from two distinct transactions merely to satisfy the statutory threshold of ₹50 lakh. The reassessment proceedings were initiated beyond three years based on seized Excel sheets allegedly recording cash payments for purchase of furniture and payment of interior designing consultancy fees across AYs 2014-15, 2015-16 and 2016-17. The Assessing Officer aggregated these payments and issued notices under Section 148, while the CIT(A) upheld the reassessment and additions. The Tribunal found that Section 149(1A) permits aggregation only where escaped income relates to the same event or occasion. Since the seized material itself disclosed two separate transactions, neither individually exceeding ₹50 lakh, the statutory threshold under Section 149(1)(b) was not met. Following the Delhi High Court decision in Ganesh Dass Khanna v. ITO, the Tribunal held that the reassessment notices were barred by limitation, allowed all three appeals, quashed the notices under Section 148 and the consequential reassessment orders for AYs 2014-15, 2015-16 and 2016-17.
For invoking the extended limitation under sections 149(1)(b) and 149(1A), the statutory threshold of Rs.50 lakh must be satisfied in respect of the same transaction, event or occasion; separate transactions cannot be clubbed merely to extend the limitation for reassessment.
Core Issue: Whether reassessment notices issued beyond three years under section 148 were valid where the Revenue invoked the extended limitation under sections 149(1)(b) and 149(1A) by aggregating alleged unexplained cash expenditure arising from two separate transactions reflected in seized Excel sheets so as to satisfy the statutory threshold of Rs.50 lakh.
Statutory Provision: The Tribunal interpreted section 149 as it stood prior to its substitution by the Finance (No.2) Act, 2024 with effect from 01.09.2024. Under section 149(1)(b), reopening beyond three years (up to ten years) was permissible only where the Assessing Officer possessed books of account or other evidence revealing escaped income represented by an asset, expenditure in respect of a transaction or in relation to an event or occasion, or entries in the books of account, amounting to or likely to amount to Rs.50 lakh or more. Further, section 149(1A) provided that where the escaped income represented by such asset or expenditure in relation to the same event or occasion had been incurred in more than one previous year, notice under section 148 could be issued for every such assessment year. The Tribunal held that the expression “such event or occasion” in section 149(1A) refers back to section 149(1)(b) and permits aggregation only where the expenditure relates to one common transaction, event or occasion spread over different years. Since the seized Excel sheets themselves disclosed two distinct transactions, namely purchase of furniture and payment of interior designing consultancy fees, the Revenue could not aggregate the expenditure relating to these independent events merely to cross the threshold of Rs.50 lakh. Consequently, the extended limitation under section 149(1)(b) read with section 149(1A) was held to be unavailable. The Tribunal’s interpretation is significant because the concept of aggregation of expenditure relating to the same event or occasion, contained in erstwhile section 149(1A), has not been retained in the substituted section 149 effective from 01.09.2024, under which the limitation provisions have been substantially recast.
Facts: The assessee company, engaged in civil construction and housing projects, had originally been assessed under section 143(3). During a search on M/s Proform Interiors Pvt. Ltd., certain Excel sheets were seized allegedly recording cash payments made by the assessee. Based on this material, reassessment proceedings were initiated for AYs 2014-15, 2015-16 and 2016-17 alleging unexplained expenditure under section 69C. The Revenue aggregated alleged cash payments of approximately Rs.51.50 lakh across three assessment years and invoked section 149(1A). The seized material, however, revealed that the payments related to two distinct transactions, namely purchase of furniture and payment of interior designing consultancy fees, which were separately recorded in the digital evidence.
Finding of the Assessing Officer: The Assessing Officer held that the aggregate unexplained expenditure exceeded Rs.50 lakh and, therefore, the extended limitation under section 149(1)(b) read with section 149(1A) was attracted. Accordingly, notices under section 148 were issued beyond three years and additions under section 69C read with section 115BBE were made.
Finding of the CIT(A): The CIT(A) upheld the reassessment proceedings and confirmed the additions, rejecting the assessee’s challenge to limitation and the other objections regarding reliance on the seized Excel sheets, absence of corroborative evidence, denial of cross-examination and violation of principles of natural justice.
Finding of the ITAT: The Tribunal held that section 149(1A) permits aggregation only where the escaped income represented by expenditure relates to the same event or occasion. On examining the seized Excel sheets, it found that the alleged cash payments related to two independent transactions—purchase of furniture and payment of interior designing consultancy fees—which were separately recorded in the seized material itself. Since these constituted separate events, they could not be clubbed merely to satisfy the statutory threshold under section 149(1)(b). As neither individual transaction exceeded Rs.50 lakh, the extended limitation beyond three years was unavailable. Following the decision of the Delhi High Court in Ganesh Dass Khanna v. ITO, the Tribunal held that the reassessment notices were barred by limitation and applied the same reasoning mutatis mutandis to AYs 2015-16 and 2016-17.
Outcome: The Tribunal allowed all three appeals and quashed the notices issued under section 148 and the consequential reassessment orders for AYs 2014-15, 2015-16 and 2016-17, holding that the Revenue could not invoke the extended limitation under sections 149(1)(b) and 149(1A) by aggregating unexplained expenditure arising from two distinct transactions/events, as the statutory threshold of Rs.50 lakh was not satisfied in respect of either transaction individually.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeals are filed by assessee against the different orders, all dated 24.11.2025 passed by Ld. Commissioner of Income Tax (A)-27, New Delhi [“Ld. CIT(A)”] in u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of separate assessment orders, dated 27.03.2024, 25.03.2022 and 27.03.2024 passed u/s 147 r.w.s. 143(3) of the Act pertaining to Assessment Years 2014-15, 201516 and 2016-17 respectively.
2. All captioned appeals by the assessee are having common issues, therefore, they are decided by a common order.
3. First we take assessee’s appeal in ITA No.715/Del/2026 for Assessment Year 2014-15.
ITA No.715/Del/2026 [Assessment Year 2014-15]
4. Brief facts of the case are that the assessee is a company, engaged in the business of civil construction and housing projects. The return of income was filed on 30.09.2014, declaring total income at NIL and assessment was taken up for scrutiny and in terms of the order passed u/s 143(3) dated 25.11.2016, returned income was accepted. Thereafter, based on the search and seizure action carried out u/s 132 of the Act in the case of M/s. Proform Interiors Pvt. Ltd. on 09.02.2022, the information was received that the assessee has made cash payments to the extent of INR 16.50 Lakhs, the source of which remained unexplained therefore, by treating the same as unexplained expenditure u/s 69C of the Act and further invoked the provision of section 115BBE of the Act and made the addition for the same amount. Accordingly, the total income was assessed at INR 16.50 Lakhs.
5. Against the said order, assessee filed an appeal before Ld. CIT(A) wherein assessee has challenged the validity of the assessment order and the additions without providing opportunity of the cross-examination of the persons from whose possession, the said Excel Sheets were found and seized. However, Ld. CIT(A) dismissed the appeal of the assessee vide order dated 24.11.2025 and confirmed the additions made by the AO.
6. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking certain legal Grounds of appeal also. The following grounds of appeal raised by the assessee are as under:-
1) “That Ld. CIT(A) erred in not appreciating that the Assessing officer has mis-interpreted section 149(1)(b) and 149(1A) as the same could only be invoked beyond three years WHARE the income escaping assessment is above 50 lakhs however in the year under consideration, the amount is Rs. 16,50,000, hence the notice issued under section 148 is barred by time as per section 149(1)(b).
2) That the lower authorities failed to comply with Digital Evidence Investigation Manual while relying on the digital evidence excel sheet.
3) That the approval granted by the specified authority for reopening is mechanical and sans application of mind as much as is apparent from the proforma of approval which is pre-printed and the authorities have merely signed on the pre-printed comments, which is illegal and tenaciously evidences the non application of mind vitiating the whole assessment proceeding.
4) The impugned Assessment Order has been passed in violation of the principles of natural justice.
5) That Ld. CIT(A) and Assessing Officer erred in making the addition in question, simply relying on the anonymous excel worksheet namely Aero Promoters wherein some cash transactions have been inserted by the office of M/s. Proform Interiors Private Limited, which bears no credence at all.
6) That Ld. CIT(A) and Assessing Officer erred in not conducting any enquiry and bringing in any corroborative evidence with regard to the source of cash in the hands of the appellant company and that of utilization by the recipient company.
7) That Ld. CIT(A) and Assessing Officer erred in making the addition on the basis of statement of Sh. Gaurav Chopra, Managing Director of M/s Proform Interiors Private Limited, wherein he has never admitted/ uttered the name of appellant company with regard to any cash sales OR cash receipts. M/s Proform Interiors Private Limited, may have been doing the cash sales and cash receipts with other clients but has never done so with the appellant company and has neither been admitted in the statement recorded, during search OR post search enquiries.
8) That Ld. CIT(A) and Assessing Officer has erred in not affording an opportunity to the appellant for cross examination of the person who had authored OR maintained the said excel sheet, which has prejudicially been relied and applied against the appellant company, in complete violation of the principle of natural justice, inspite of various requests made during the course of assessment proceedings.
9) That Ld. CIT(A) and Assessing Officer erred in making the addition merely on the basis of assumptions, presumptions, whims and fancies by disregarding the clear evidence/ confirmation of M/s Proform Interiors Private Limited that no cash has been received from the appellant company.
10) That Ld. CIT(A) and Assessing Officer erred in making the assumption, presumption drawn against the appellant company U/s 132(4A) in respect of excel sheet recovered from M/s Proform Interiors Pvt. Ltd, which was neither the extracts from the books of accounts of M/s Proform Interiors Pvt. Ltd nor bear any signature, stamp, attestation, confirmation from the appellant company. 11. That Ld. CIT(A) and Assessing Officer erred in invoking section 69C r.w.s. 115BBE of the Act to make the addition by ignoring the explanation offered by the assessee company and documents produced before him. 12. That the Appellant crave leave of this Honble Tribunal to add, amend OR delete grounds of appeal before OR during the course of hearing.”
7. In Ground of appeal No.1, the assessee has challenged the re-opening of the assessment between the period of 03 years from the end of the relevant AY when the assessee has not fulfilled the conditions provided u/s 149(1)(b) of the Act.
8. In support of Ground of appeal, Ld. AR for the assessee submits that in the instant case, the assessment was already completed u/s 143(3) in terms of order passed on dated 25.11.2016. Thereafter, based on the information found and seized in the shape of electronic evidence i.e. Excel Sheet from the possession of the employees of M/s. Proform Interiors Pvt. Ltd. during the course of search carried out on 09.02.2022, the AO recorded the reasons that the assessee has made unexplained payments of INR 16.50 lacs and issued the notice u/s 148 of the Act for the year under appeal. Ld.AR drew our attention to the provision of section 149(1)(b) of the Act according to which no notice u/s 148 shall be issued for relevant AY for 03 years but not more than 10 years elapsed from the end of the relevant AY and the income escaped amounts or to likely to INR 50.00 Lakhs or more. He thus, submits that in the instant case, in the reasons recorded in terms of the notice dated 19.04.2023, supplying the reasons recorded, it was observed that the AO has recorded his satisfaction of escapement of income of INR 16.5 Lakhs only. Thus, the primary condition as enumerated u/s 149(1)(b) of the Act has not been fulfilled and therefore, Ld.AR submits that consequent proceedings initiated u/s 147 of the Act, are barred by limitation and he prayed accordingly.
9. On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that AO has rightly issued the notice u/s 148 of the Act and he referred the Excel Sheet retrieved during the search in the case of M/s. Proform Interiors Pvt. Ltd. where payment of INR 51.50 Lakhs made in cash by assessee in three assessment years was found. As per Ld. CIT DR, the total unexplained expenditure exceeds the threshold limit of INR 50.00 Lakhs therefore, he submits that AO has rightly invoked the provision of section 148 of the Act. For this, he referred para 8 at page 10 of the assessment order wherein AO has recorded the satisfaction note. Ld. CIT DR thus, requested that the aggregate value of escaped income as discovered during the search exceeds Rs. 50.00 lacs and thus extended period u/s 149(1)(b) of the Act is applicable and therefore, the AO has rightly initiated the reassessment proceedings in the case of the assessee and he prayed accordingly.
10. Heard the contentions of both parties at length and perused the material available on record. Before going further, we first examine the provisions of section 149 of the Act in particular which is extracted as under [as existed for the relevant AY applicable for the search conducted on or after 01.04.2021] :-
149. “Time limit for notice-
(1) No notice under section 148 shall be issued for the relevant assessment year,-
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of-
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.”
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A. or section 153C read with section 153A. is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,-
(i) a search is initiated under section 132: оr
(ii) a search under section 132 for which the last of authorisations is executed; or
(iii) requisition is made under section 132A,
after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:
Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,-
(a) a search under section 132 which is initiated; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) a requisition made under section 132A,
after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:
Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
Explanation For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.
(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.”
11. Further in terms of provision of section 149(1A) of the Act, the cumulative figure of various AYs would be considered in case escaped income in the shape of investment in asset or expenditure relates to an event or occasion that has occurred in more than one assessment year falling within the period referred in clause (b) of sub-section (1) of section 149, in such case notice u/s 148 shall be issued for each such Assessment Year separately for reassessment.
12. In this regard, we may refer the copy of the documents relied upon by the AO which are reproduced in para 5 at pages 3 to 6 of the assessment order wherein total 04 (Four) pictures of alleged incriminating Excel Sheets retrieved from the digital data seized during the course of search in the case of M/s. Proform Interiors Pvt. Ltd. containing details of transaction entered into by the assessee with it. Even as stated above, in the instant case, there were 02 (Two) different events or occasion for which cash payments were made by the assessee on different dates and both the events are separate therefore they cannot be considered as one event or occasion for the purpose of invoking the provision of section 148 of the Act. From the perusal of all the Excel Sheets found in the digital data seized from M/s. Proform Interiors Pvt. Ltd. and reproduced in the assessment order pages 3 to 5, it is observed that payments made in cash was paid for Two different events wherein a sum of INR 12.50 Lakhs was paid (INR 10.00 Lakhs on 03.08.2013 and INR 2.50 lakhs on 17.12.2013) for purchases of furniture which is one Event. Further in terms of picture-1 reproduced at page 3 of the assessment order, a sum of INR 4.00 Lakhs noted as paid on 25.05.2013 towards the interior designing fee which is separate and second event. These two events i.e. First of purchases of furniture and Second payment of fee for Interior designing consultancy are two separate events thus, both the events cannot be clubbed together so as to conclude that cumulative figure of unexplained cash paid can be taken together for the purpose of invoking the provision of section 149(1)(b) r.w.s. 149(1A) of the Act. It is further observed that in none of the Excel Sheet as reproduced in the assessment order, no entry regarding the payment made or outstanding balance for two separate events were mixed and they were separately noted meaning thereby even M/s Proform Interiors Pvt. Ltd. had considered these as two separate transactions carried out by the assessee with M/s Proform Interiors Pvt. Ltd.
13. The Hon’ble Delhi High Court in the case of Ganesh Das Khanna vs ITO reported in [2024] 156 com 417 (Del. HC) held that if the payment for unexplained expenditure for various years for one event other than in term of provision of section 149(1)(a), the limitation period as provided u/s 149(1)(b) of the Act could be taken for cumulative years beyond the period of 03 years from the relevant AY upto the period of 10 AYs in terms of section 149(1A) of the Act. As observed above, in the instant case, there are two different events and cumulative payment in cash of unexplained expenditure for each individual event was not more than Rs. 50.00 lacs and therefore, the provisions of section 149(1A) of the Act cannot be invoked. Accordingly, the notices issued for various assessment years beyond the period of three year from the end of the relevant assessment year based on the satisfaction that income has escaped assessment for various assessment years in the shape of unexplained expenditure cumulatively more than Rs. 50.00 lacs as per 149(1A) of the Act is incorrect and consequent notice issued u/s 148 is hereby quashed. Accordingly, Ground of appeal No.1 raised by the assessee is allowed.
14. Since we have already allowed the Ground of appeal No.1 raised by the assessee, the remaining Grounds of appeal became academic hence, not adjudicated.
15. In the result, appeal of the assessee is allowed.
16. Now we take assessee’s appeal in ITA No.716 & 717/Del/2026 for Assessment Years 2015-16 & 2016-17.
ITA No.716 & 717/Del/2026 [Assessment Years 2015-16 & 2016-17]
17. In the above-mentioned paras, we have allowed the appeal of the assessee in ITA No.715/Del/2026 for Assessment Year 2014-15 by holding that the threshold limit of 50.00 Lakhs for cumulative payment in three captioned assessment years in one event or occasion was not fulfilled and therefore, the reassessment order was quashed. The assessments for these Two assessment years were reopened on the same satisfaction that cumulative unexplained expenditure of more than INR 50.00 Lakhs was incurred by the assessee. Before us, both the parties fairly admitted that the facts are identical to the facts in ITA No.715/Del/2026 for AY 2014-15, thus, by following the aforesaid observations in ITA No.715/Del/2026 for AY 2014-15 which are Mutatis Mutandis applicable to the facts of these appeals filed by the assessee, the consequent reassessment orders passed are hereby, quashed. In view of the above, all Grounds of appeal raised by the assessee in both captioned appeals are allowed.
18. In the result, both appeals of the assessee are allowed.
19. In the final result, all three captioned appeals of the assessee in ITA No.715, 716 & 717/Del/2026 for Assessment Years 2014-15, 2015-16 & 2016-17 respectively, are allowed.
Order pronounced in the open Court on 08.07.2026.
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