Delhi HC Upholds Reopening of Zoom Insurance Brokers for AY 2020-21

Zoom Insurance Brokers Pvt. Ltd. Vs ACIT (Delhi High Court)

Brokerage Disclosed, Reopening Survives: Delhi High Court Leaves Transaction Scrutiny to the AO

The controversy

Does disclosure of a receipt in the books and income-tax return necessarily defeat reopening when the Department questions the genuineness and underlying nature of the transaction?

The Delhi High Court dismissed an insurance broker’s challenge to reopening for AY 2020–21, following the decision of a coordinate Bench in the company’s own case for the preceding year.

The Court held that, except for the assessment year, the facts were identical. Judicial discipline required it to follow the earlier decision, which had left factual examination of the disputed transaction to the Assessing Officer.

The dismissal allowed reassessment proceedings to continue; it did not establish that the transactions were bogus or confirm any addition.

The challenge to reopening

The company challenged an order dated 30 June 2026 under Section 148A(3) and the consequential notice issued on the same date under Section 148, concerning AY 2020–21.

At the outset, the Revenue pointed out that the company had challenged an identical reopening notice for AY 2019–20. That writ petition had already been dismissed by the High Court on 11 September 2025.

The company accepted that the information and allegations in the two years were almost identical. It nevertheless sought reconsideration by relying on an order in T S G International Marketing Private Limited v. Income Tax Officer.

Insurance-sector investigation formed the background

The present judgment extensively reproduced the earlier decision in the company’s case.

That decision recorded that a search conducted on 30 November 2022 covered Middle Layer Business Entities—MLBEs—in the insurance sector. The investigation concerned payments made by insurance companies under descriptions such as marketing, advertising, business promotion and online media services.

According to the Department, certain entities lacked the capacity to render those services and merely passed funds onward to insurance intermediaries, agents, master policyholders or their nominees.

The alleged arrangement involved routing additional or overriding commission exceeding IRDAI limits through these entities. The earlier proceedings identified a transaction of ₹82,25,822 with IFFCO-TOKIO General Insurance Company Ltd.

These figures and detailed explanations relate to AY 2019–20, as reproduced in the present judgment. The order does not separately specify the disputed amount for AY 2020–21.

The company’s defence: already accounted for and taxed

In the earlier proceedings, the company maintained that the receipt represented legitimate brokerage earned against insurance premiums placed for clients.

It produced an insurer’s email confirmation, invoices, statements and a reconciliation. It stated that it had recognised ₹83,28,333 as taxable brokerage, exceeding the ₹82,25,822 reflected in the Department’s information.

The company also denied any relationship with the identified MLBEs or receipt of funds through them. It explained that it was an IRDAI-regulated broker, with more than 99% of its business comprising group business rather than retail insurance.

Its central contention was straightforward: the brokerage had already been disclosed in the profit and loss account and return, and tax had been paid. Therefore, it argued, the alleged receipt could not constitute escaped income.

Why disclosure did not end the inquiry

The Department disputed the sufficiency of the explanation. In the earlier order reproduced by the Court, it questioned whether the documents established genuineness and noted the absence of a working showing commission as a percentage of premium receipts.

The coordinate Bench had held that the company’s contention required factual examination. Whether the identified amount arose from a spurious transaction resulting in escapement was a matter for the Assessing Officer to investigate, rather than for the writ court to determine.

The earlier Bench also distinguished Jindal Saw Limited on its facts. It noted that, in that case, the explanation and the divergence between the show-cause allegations and the eventual order were material features.

Thus, the company’s disclosure argument did not secure interference at the reopening stage.

Coordinate Bench decision governed the outcome

The company submitted that the earlier Bench had not properly considered T S G International Marketing. The Revenue responded that the order relied upon in that matter was interim, whereas the decision in the company’s own case was final.

The present Bench found the facts identical apart from the assessment year. Guided by judicial discipline, it declined to take a different view and dismissed the writ petition and pending applications.

Author’s comments

Disclosure and genuineness are separate questions, but that distinction must be applied carefully. An accounted receipt does not automatically answer every allegation about the transaction underlying it.

Equally, this judgment does not explain or approve a final addition of the disclosed brokerage. The precise escapement and its tax consequence remain matters for assessment, subject to the company’s explanations and evidence.

The practical lesson is to address the investigation allegation directly. Alongside invoices and reconciliations, the response should explain the services rendered, contractual basis, commission computation and payment trail relevant to the allegation.

Here, the immediate obstacle was also precedential: an identical challenge had already failed in the assessee’s own case. The Court followed that decision and left the factual dispute to the Assessing Officer.

Cases Discussed:

• Zoom Insurance Brokers Pvt. Ltd. v. Assistant Commissioner of Income Tax & Anr., W.P.(C) 14027/2025, judgment dated 11.09.2025 (Delhi High Court) — followed; the coordinate Bench had rejected the assessee’s substantially identical challenge for AY 2019-20 and left examination of the alleged spurious transaction to the Assessing Officer.
• T S G International Marketing Private Limited v. Income Tax Officer, Ward 25(3), Delhi, W.P.(C) 9715/2025, order dated 14.07.2025 (Delhi High Court) — relied upon by the assessee; distinguished in the present proceedings as an interim order, whereas the judgment in the assessee’s own case was final.
• Jindal Saw Limited — distinguished in the earlier coordinate Bench judgment on the ground that the facts concerning the explanation furnished and variance between the notice and order were different.

FULL TEXT OF THE JUDGMENT OF DELHI HIGH COURT

1. By way of the present writ petition, the petitioner has challenged the order dated 30.06.2026 passed under Section 148A(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act of 1961‟) so also notice of the even date issued under Section 148 of the Act of 1961 for Assessment Year 2020-21 on various counts.

2. Mr. Anant Mann, learned Junior Standing Counsel, at the outset submitted that the petitioner had challenged identical notice dated 23.06.2025 issued by the Assessing Officer for assessment year 2019-20, by the way of writ petition and this Court had refused to entertain petitioner’s writ petition and therefore, the instant writ petition should also be dismissed.

3. Learned counsel for the petitioner though accepted the fact that the information and the allegation in the instant notice issued under Section 148A(1) of the Act of 1961 so also the allegation and the information mentioned in the notice dated 23.06.2025 for assessment year 2019-20 are almost identical, but submitted that while rejecting petitioner’s earlier writ petition bearing W.P.(C) 14027/25, the Coordinate Bench of this Court had not properly considered the order of this Court rendered in the case of T S G International Marketing Private Limited v. Income Tax Officer, Ward 25(3), Delhi in W.P.(C) 9715/2025 and thus, this petition needs to be entertained.

4. Learned Junior Standing Counsel controverted this contention by submitting that the order dated 14.07.2025 in the case of T S G International Marketing Private Limited (Supra) is only an interim order, whereas the judgment dated 11.09.2025 is a final order passed in petitioner’s own case.

5. Heard learned counsel for the parties.

6. Indisputably, in petitioner’s own case for preceding assessment year (2019-20), this Court has refused to interfere and rejected petitioner’s writ petition by observing thus:

“…8. Having heard the learned counsel for the petitioner and perused the record, we must at the outset refer to the notice dated 24.03.2025 issued under Section 148A(1) of the Act on the ground that the income subject to tax has escaped assessment within the meaning of Section 147 of the Act as per “information in accordance with the risk management strategy formulated in this regard”. Further, as per the impugned notice the respondent has mentioned that a search and seizure under Section 132 of the Act on Middle Layer Business Entities („MLBE‟, henceforth) of the insurance sector was conducted on 30.11.2022 to verify the claim of services against which these entities had received payments from the insurance companies. According to the notice, these MLBEs were neither authorized to receive commission nor registered under Insurance Regulatory and Development Authority of India („IRDAI‟, hereinafter) and have acted as pass-through entities for the insurance companies. These payments were masked under various heads such as online media expenses, advertisement services, online marketing, marketing activities, brand promotion expense, etc., and that these were finally paid to the insurance agents or insurance intermediaries or their nominees. Such search and seizure has covered 37 MLBEs and 32 insurance companies were part of post search verification.

9. According to the impugned notice, the respondents have stated that the insurance companies have signed several service agreements with several MLBEs to facilitate transfer of such payments. The notice states that the analysis of this financial data was carried out and has indicated that these MLBEs do not have the capacity to render such services and the funds which have been received from the insurance companies were simply passed on without rendering any relevant services. The amount of Rs. 82,25,822/- from IFTGI was found to be one such transaction of the assessee company.

10. The relevant paragraphs of the impugned order dated 23.06.2025 reads as under:

“2.1 On perusal of the information uploaded on the insight portal, it is noticed that a Search and seizure u/s 132 on Middle Layer Business Entities (MLBEs) of Insurance Sector was conducted on 30.11.2022 by Investigation Unit -1 and Unit-5, Mumbai under names Wings Brand Group and Ajay Mehta group respectively to verify the claim of services against which these entities have received huge payments from the insurance companies. These MLBEs were not authorized to receive the commission since they are not registered with the IRDAI and they acted as pass-through entities for Insurance Companies. These payments were masked as various heads of expenses such as online media and advertisement services, online marketing, marketing activities, brand promotion expense etc. These were finally paid either to Insurance agents/insurance intermediaries/MPHs or to their nominees. 37 Entities (MLBEs) were covered during search operation and 32 insurance companies were covered as part of post search verification.

2.2 The search action revealed that these MLBEs have acted merely as pass-through entities and transferred the additional commission (also called as Overriding commission-ORC), over and above the IRDAI limit, to Insurance intermediaries/agents, Master Policy holders or their nominees. The evidences gathered from different premises clearly established the nexus between Insurance Companies and the end beneficiaries who are either the Insurance agents/intermediaries Master Policy holders, or their nominees. The Middle Layer Business Entities have shown the payments received from Insurance Companies under the head business promotion, marketing expenses, advertisement expense etc. and have further debited expenses under different heads to transfer the commission over and above the IRDAI limit to the end beneficiaries. These middle layer entities acted as payment facilitator and passed on the amount received from insurance companies to nominees of insurance intermediaries and agents.

2.3 The Insurance companies have signed service agreements with several middle layer business entities (MLBEs) for transferring huge payments under the head marketing and business promotion to various entities. Analysis of financial data and enquiries of these entities were carried out by the Investigation Wing which indicated that these entities are not having the capacity to render such services. They have received the fund from the Insurance companies and simply passed on the funds to other individuals and other business entities without receiving any services.

2.4 From the investigation report it is gathered that the assessee company also found to be involved in bogus transaction amounting to Rs. 82,25,822/- with IFFCO-TOKIO General Insurance Company Ltd.

3. Considering the above referred credible information and analysis, subsequent to the information, proceedings u/s 148A of the Income-tax Act, 1961 was initiated. In view of the above facts and circumstances of the case, a show cause notice u/s 148A(1) was issued to the assessee on 31/03/2025 requesting the assessee company to respond by 17/04/2025, as it appeared that income chargeable to tax has escaped assessment for the transaction mentioned above amounting to Rs. 82,25,822/- during the year under consideration. In response of the notice the assessee has submitted its submission on 17-04-2025. Relevant portion of the reply is reproduced as under:-

“………..In the matter under consideration the assessee has taken a written email confirmation from ITGI stating that the amount of INR 82,25,822/- as shown in the insight portal is a genuine transaction and it pertains to the brokerage income against the premium placed by the assessee to ITGI on behalf of their various client’s insurance policies. In the email confirmation received from ITGI dated 14/04/2025, the officials of ITGI shared a reconciliation summary of Form 26AS versus the amount reported on income tax insight portal. In the reconciliation received over the mail, the difference is on account of credit memos which are not reported in Form 26AS but reported on insight portal. The assesee hereby further states that they have reported a taxable income of Rs. 83,28,333/- as brokerage (basis on the monthly statements received from the ITGI) in their Audited Financials of AY 19-20. A reconciliation of reported income versus the amount reported in the Insight portal is as below:

 It can be verified from the above reconciliation that during the Financial Year 2018-19 (AY 2019-20), the assessee has reported a taxable income of Rs. 83,28,333/-which is higher than the amount of Rs. 82,25,822/- as reported on Insight portal of the Income Tax department.

2. This is a legitimate income within IRDAI rules and regulations and the same has also been declared in our profit and loss account.

3. Please find attached here with a list of invoices along with copies of invoices (backed up by insurer statements) that were raised on Iffco-Tokio General Insurance Company Ltd during the period from 1st of April 2018 to 31st of March 2019, (AY 2019-20). The total of all these invoices is INR. 83,28,333/- and the same amount has been appropriated as income in the profit and loss account for the FY 2018-19 (AY 2019- 20).

4. So, all the relevant documents have been reconciled and are matching with each other confirming that an amount of Rs. 83,28,333/- is the only amount received from ITGI against the premium placed by us to them through the policies of our various clients. And this amount has already been accounting in our profit and loss statement and due tax has already been paid on the same. Also, it would not be out of place to mention that throughout the life span of our existence, we as company have remained profitable, deposited our taxes diligently and have contributed significantly to the cause of the country. Last 5years data is selfexplanatory and have been reproduced below for your kind perusal: –

 Further kindly note below points also:

a) Any income/payment which we have received from ITGI have been booked in our profit and loss account and tax has been paid on the same. (Annexure 4a to 4c Invoice copies with ITGI statements)

b) We have no relationship whatsoever with Wings Brand Group and Ajay Mehta group herein referred as MLBES.

c) We have not received any income/payment directly or indirectly through any of these MLBES.

d) As per our limited knowledge the practice of additional commissions over and above IRDAI prescribed norms were prevalent in retail insurance business and not in corporate or group insurance business.

e) We are a IRDAI broker whose more than 99% of business is group business and not retail business. f) We categorically deny our involvement in any bogus transaction and all the above submissions are evident of the same. In view of above stated facts, we pray that your Honor shall accept our submission as our true and correct submission. The notice under section 148 of the Income Tax Act, 1961 should not be issued as there is no suppression of income and that we have earned only the legitimate brokerage as per prescribed IRDA guidelines which has been fully disclosed in the return of income filed with the Income Tax Authorities for the AY 2019-20. We assure you of our full cooperation in this matter and are committed toproviding all necessary information and documentation……”

Alongwith the above reply, documents in support of assessee‟s claim was also furnished

4. The entire submissions of the assessee have been considered and carefully gone through and it is found that the reply of the assessee is vague and inconclusive. ITGI‟s email confirmation (14/04/2025) is a self-serving document without third-party verification which can not be relied upon. Similarly, the invoices furnished alone does not prove the genuineness of transactions.

4.1 The core issue as mentioned in the showcause notice has not at all been addressed as no comment has been made with regard to percentage of commission received from IFFCO Tokyo General Insurance Company Ltd(ITGI) and has given very vague reply stating: “ as per our limited knowledge the practice of additional commissions over and above IRDAI prescribed norms were prevalent in retail insurance business and not in corporate or group insurance business”. No working of commission in terms of % of premium receipts has been given. Mere denial of the issues involved is insufficient to accept the plea of the assessee. In light of the same, the reply of the assessee is considered evasive and devoid of substantial documentary evidence and therefore can not be accepted.

5. In this case income likely to escape is more than Rs.50 lakhs and the same is represented in the form of transaction or entries as mentioned above which shows the income chargeable to tax, which has escaped assessment, amounts to more than fifty lakhs rupees. Thus, the assessee‟s case is covered under provision of section 149 (1)(b) of the Income Tax Act, 1961. Accordingly, it is concluded that it is a fit case for issuing notice u/s 148 of the Act for A.Y. 2019-20.

6. Accordingly, after considering the facts of the case, as mentioned above, it is concluded that this case is a fit case for issuing notice u/s 148 of the I.T. Act.”

xxxxx

13. It is seen from the above that the contention of the petitioner in respect of the sum of Rs. 82,25,822/- being an amount which has been declared in books and return of income tax and as such the impugned notice which alleges that such an amount has escaped the assessment is clearly untenable, is concerned the issue need to be seen in facts for which it is imperative that the notice is issued to elicit a reply and to check whether the sum of Rs. 82,25,822/- is a result of a spurious transaction, resulting in the income escaping assessment/Tax. Such an exercise shall be undertaken by the Assessing Officer, and surely not by this Court.

14. Suffice to state that the reliance placed by Mr. Gupta on the judgment in the case of Jindal Saw Limited (supra) can be distinguished on facts in as much as the notice under Section 148A(b) was issued on account of undeclared/unexplained income whereas, the assessee in that case had sufficiently explained the amount and the impugned order in that case was seen to be at variance with the allegations made in the impugned notice in the said case. Needless to state, the reliance placed by Mr. Gupta on this judgment is misplaced.

15. In view of the above, we find no merit in this petition and the same is dismissed along with the accompanying application for stay…”

7. Except for the assessment year (which in the present case is 2020-21), the facts are identical.

8. Being guided by the judicial discipline, we cannot take a view other than what the Coordinate Bench had taken in petitioner’s own case.

9. The writ petition is, therefore, dismissed.

10. The pending applications are also disposed of accordingly.