Case Law Details
Wudstay Travels Private Limited Vs ACIT (ITAT Delhi)
Delhi ITAT quashed reassessment u/s 147/148, holding that approval beyond 3 years must come from Principal Chief Commissioner or Principal Director General, not from a mere Principal Commissioner.
Assessee had not filed return for A.Y. 2017-18. Based on information about time deposits & interest income, AO issued notice u/s 148A(b) on 01-06-2022 and framed assessment adding ₹3.10 crore u/s 69 along with minor additions. ITAT noted that the sanction for reopening was obtained only from the Principal Commissioner, though notice was issued after 3 years from the end of A.Y. 2017-18.
Following Delhi HC in CPI (Marxist) v. CIT(Exemptions) & Dalpat Baraiya v. ITO, ITAT held that such sanction by an incompetent authority vitiates jurisdiction. Since mandatory approval u/s 151 was not taken from the proper authority, the entire reassessment was void ab initio.
Accordingly, the Tribunal quashed the assessment, allowed the appeal on legal grounds & kept other issues open.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “NFAC”] vide order dated 02.04.2025 pertaining to A.Y. 2017-18 arising out the assessment order dated 25.05.2023 u/s.147 r.w.s 144 of the Income-tax Act, 1961, (in short ‘the Act’).
2. The assessee has raised the following grounds in appeal:
1. That the appellant denies the liability to be assessed at the total income of Rs.3,19,26,300/- and accordingly denies the liability to pay tax and interest demand thereon.
2. That having regard to the fact and circumstances of the case Ld. CIT(A) has erred in law and on facts in assessing jurisdiction to issue notice u/s 148 of the Income Tax Act, 1961 (the Act) and to frame assessment u/s 147 of the Act without observing the statutory conditions as mentioned in the Section 147 to 151 of the Act.
3. That having regard to the fact and circumstances of the case Ld. CIT(A) has erred in law and on facts in not quashing the assessment proceedings when the jurisdictional notice purportedly issued u/s 148 of the Act was bad in law and without DIN as prescribed procedure.
4. That having regard to the fact and circumstances of the case Ld. CIT (A) has erred in law and on facts in not quashing the assessment proceedings when the notice and order u/s 148A were void and were not served on the assessee and more so when notice u/s 148 was not served on the assessee.
5. That having regard to the fact and circumstances of the case Ld. CIT (A ) has erred in law and on facts in making an addition of Rs. 3,10,00,000/- on account of unexplained investment in time deposit.
6. That having regard to the fact and circumstances of the case Ld. CIT(A) has erred in law and on facts in making an addition of Rs. 8,52,909/- on account of interest income.
7. That having regard to the fact and circumstances of the case Ld. CIT(A)has erred in law and on facts in making an addition of Rs. 73,390/- on account of contractual receipt.
8. That having regard to the fact and circumstances of the case Ld. CIT(A) has erred in law and on facts in passing the appellate order without following the principals of natural justice and without giving adequate opportunity of being heard.
9. That the appellate craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.
3. The brief facts of the case are that the assessee is a private Ltd. Company and did not filed the return of Income for the A.Y. 2017-18. The assessing Officer received information through ITBA that the assessee purchased time deposit for Rs. 3,10,00,000/- received Rs.73,390/- as contract receipt and also received interest of Rs. 8,52,909/-. In the fact of the above proceedings u/s 148 of the Act was initiated by the Assessing Officer and notice u/s 148 A(b) of the Act was issued to the assessee on 01-06-2022 by giving the 14 days, time to file the objection. The assessee did not file any response, even various notices issued u/s 142(1) and u/s 144 were issued but assessee failed to file any objection. The Assessing Officer completed the assessment after making the addition of Rs.3,10,00,000/- u/s 69 of the Act Rs.8,52,909/- income on interest, and contractual receipt of RS. 73,390/- u/s 194C of the Act.
4. Aggrieved the order of the AO, the assessee filed the appeal before the Ld. CIT(A), who vide his order dated 02- 04-2025 dismissed the appeal. Being aggrieved the order of the Ld. CIT(A) the assessee is in appeal before the Tribunal. 5. Ld. Counsel for the assessee has raised the legal ground no.4 and stated that first notice u/s 148 was issued on 3006-2021 for the A.Y. 2017-18 under the old reassessment tax regime, however due to the introduction of new reassessment tax regime from 01-04-2021 and in the compliance of the Hon’ble Supreme Court Order in the case of Ashish Agarwal notice u/s 148A(b) of the Act was issued on 01-06-2022 and consequent order under section 148A(d) of the Act on 21-07-2022. The case of the assessee relates to the A.Y. 2017-18 and the notice /order was issued on 21-07-2022 after a period of three years from the end of relevant assessment Year, the sanctioning authority should have been Principal Chief Commissioner or Principal Director General or Chief commissioner but in this case the approval has been obtained from the Pr. Commissioner of Income Tax, which is not the competent authority to grant the permission. This issue is squarely covered by the Judgement of Hon’ble Jurisdictional Delhi High Court in the case of Communist Party of India (Maxist) V. CIT(Ex) WP 9031/2023 dated 28-04-2025. In the case of Dalpat Baraiya vs Income Tax officer Ward -3(3)(1) the Co-ordinate bench held that where three years had expired from the end of the Assessment year 2018-19, sanctioning authority u/s 151(ii) of the Act should have been Principal Chief Commissioner and not Principal Commissioner, thus order under section 148A(d) and notice under section 148 issued on basis of approval granted by Principal Commissioner were to be quashed and set aside.
6. The Ld. Sr. DR has relied the order of the lower authorities and submitted that the notice/ order was issued as per the directions of the Hon’ble Supreme Court in the case of Ashish Agarwal [2022] 444 ITR 1 SC. In the present case the notice was issued on 21-07-2022 for the A.Y. 2017-18 from the prior approval of the Pr. Commissioner of Income Tax 07 Delhi, without, the approval of the authority specified u/s 151 of the Act. The notice was issued beyond the period of three years from the end of the relevant assessment year, thus in term of section 151 of the Act the sanction was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or Director General. Respectfully following the decision of the Hon’ble High Cort and the Co-ordinate Bench we allowed the appeal of the assessee and quashed the assessment order dated 20-04-2023.
7. We allowed the appeal of the assessee on legal ground the other grounds have become academic and keep them open for adjudication.
8. In the result the appeal of the assessee is allowed.
Order pronounced in the open court on 28.10.2025.
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