Mirha Exports Pvt. Ltd. Vs DCIT (ITAT Delhi)
Delhi ITAT Delivers Massive Relief in Post-Search Reassessments – No ‘Asset’, No Reopening Beyond 3/6 Years; 148 Notices & Assessments Quashed Across Multiple Years
In a significant batch ruling involving search assessments of Mirha Exports Pvt. Ltd., the Delhi ITAT quashed reassessment proceedings for several years after holding that the Revenue cannot invoke section 148 beyond prescribed timelines unless strict statutory conditions are satisfied. The Tribunal dealt extensively with the amended post-2021 reassessment regime and repeatedly emphasized that mere allegations of unaccounted sales or estimated profits do not automatically qualify as “asset”-based escapement for extended limitation purposes.
For AY 2013-14, the ITAT held that the notice issued u/s 148 on 29.03.2023 was completely barred by limitation since, after the Finance Act, 2021 amendments, the permissible 10-year block from AY 2023-24 extended only up to AY 2014-15. Accordingly, AY 2013-14 fell outside the statutory reopening period and the reassessment was quashed relying on Ojjus Medicare Pvt. Ltd. and Filatex India Ltd.
For AYs 2014-15 to 2017-18, the Tribunal held that reopening beyond six years was invalid because the alleged escaped income was not represented in the form of an “asset” as required under the amended provisions read with section 153A/149. The Revenue argued that cash constitutes an asset, but the ITAT noted that no cash was found during search and additions were made merely on account of alleged unaccounted sales and estimated expenses. Therefore, the extended limitation provisions could not be invoked.
For AYs 2018-19 to 2020-21, the ITAT again quashed reassessment notices issued beyond three years, holding that alleged unaccounted sales and estimated disallowances did not fall within the categories specified in section 149(1)(b), namely escaped income represented in the form of asset, expenditure, or book entries exceeding ₹50 lakh. The Tribunal relied on decisions including L-1 Identity Solutions and ACE Tyres Pvt. Ltd. to hold that the notices lacked legal jurisdiction.
On merits for AY 2021-22, the Tribunal partly accepted the assessee’s plea against excessive gross profit estimation. While the CIT(A) had sustained GP addition at 16.5% on alleged unaccounted sales, the ITAT reduced the GP rate to 10%, noting that search material itself reflected existence of unaccounted purchases, salary and administrative expenses.
For AY 2022-23, the ITAT delivered another important ruling by holding that after a search conducted on 21.01.2023, the AO could not proceed under normal scrutiny provisions u/s 143(3). The Tribunal held that only reassessment machinery under sections 148/148B could have been invoked in view of Explanation 2 to section 148. Since the AO bypassed the mandatory reassessment procedure, the assessment itself was held to be without jurisdiction.
For AY 2023-24, the Tribunal deleted addition relating to sundry creditors. While the AO had invoked section 68 and the CIT(A) converted the addition into one u/s 41(1) for cessation of liability, the ITAT held that liabilities continued to be reflected and acknowledged in books and had never been written back. Therefore, there was no cessation of liability and no addition could survive u/s 41(1).
FULL TEXT OF THE ORDER OF ITAT DELHI
