Section 154 Order Cannot Survive Once Assessment Is Quashed: ITAT Delhi

Vineet Kumar Jain Vs DCIT (ITAT Delhi)

Section 154 Order Cannot Survive Once Assessment Is Quashed; CIT(A) Can’t Direct Reopening: ITAT Delhi

The appeals before the Income Tax Appellate Tribunal (ITAT), Delhi, arose from separate orders of the Commissioner of Income Tax (Appeals)-24 dated 30.10.2025 and 07.11.2025, relating to assessment orders passed under Sections 153A read with 143(3) and 154 of the Income Tax Act, 1961, for Assessment Years (AYs) 2013-14 and 2019-20. Since both appeals involved the same assessee, they were heard together and disposed of by a common order.

Appeal for AY 2013-14 (ITA No. 8474/Del/2025)

The assessee challenged the order passed under Section 154 read with Section 153A, raising grounds including that the rectification order was beyond the scope of Section 154, involved a debatable issue relating to an addition of ₹27,11,491, lacked approval under Section 153D, was based on incorrect facts and unconfronted material, violated principles of natural justice, related to an unabated assessment year without incriminating material, and did not contain a Document Identification Number (DIN) in accordance with CBDT Circular No. 19/2019.

At the outset, the assessee submitted that the assessment order passed under Section 153A read with Section 143(3) dated 24.06.2021, which formed the basis of the subsequent Section 154 order dated 08.09.2021, had already been quashed by a co-ordinate Bench of the Tribunal. Consequently, it was argued that the Section 154 order and the appellate order confirming it had become infructuous.

The Tribunal noted that the original assessment under Section 153A read with Section 143(3) had been quashed in ITA No. 8040/Del/2025 dated 23.03.2023 due to deficient approval under Section 153D. It further recorded that the Assessing Officer had initiated rectification proceedings under Section 154 because an addition of ₹27,11,491 towards alleged undisclosed commission income, though discussed in the draft assessment order, had been omitted from the final assessment order. The Commissioner (Appeals) had confirmed the rectification order, leading to the present appeal.

The Tribunal observed that an order under Section 154 is intended only to rectify mistakes in an assessment order. Since the foundational assessment order dated 24.06.2021 had already been quashed by the Tribunal, the Section 154 order could not survive because its foundation no longer existed. Accordingly, the Tribunal set aside and quashed the order of the Commissioner (Appeals) dated 07.11.2025 and allowed the assessee’s appeal.

Appeal for AY 2019-20 (ITA No. 8475/Del/2025)

The assessee challenged, among other things, the Commissioner (Appeals)’ direction that the Assessing Officer could reopen AY 2018-19 under Sections 147/148 read with Section 150 for examining an alleged unaccounted cash receipt of ₹25,00,000, the confirmation of an addition of ₹5,00,000 under Section 69A, the validity of approval under Section 153D, admissibility of electronic evidence without a certificate under Section 65B of the Indian Evidence Act, and the absence of DIN in the assessment order. At the hearing, the assessee did not press grounds relating to Section 153D approval, Section 65B, and DIN, and those grounds were dismissed as not pressed.

The Tribunal identified the principal issue as the addition of ₹30 lakh allegedly received through Shri Pargat Singh. The return declaring income of ₹56,96,590 had been filed on 17.10.2019. Following a search conducted on 12.03.2019 in the case of another person, electronic evidence in the form of WhatsApp chats allegedly indicated that Shri Prabhat Kumar Tandon had given ₹30 lakh in cash to Shri Pargat Singh, who had then passed it to the assessee. The Assessing Officer treated the amount as unexplained money under Section 69A. Before the Commissioner (Appeals), the assessee contended, without prejudice, that only ₹5 lakh related to the relevant assessment year while ₹25 lakh pertained to AY 2018-19. The Commissioner (Appeals) directed the Assessing Officer to consider reopening AY 2018-19 for the ₹25 lakh and confirmed the addition of ₹5 lakh.

Before the Tribunal, the assessee argued that the Commissioner (Appeals) lacked authority to direct reopening of AY 2018-19 and relied on the Gujarat High Court decision in Shubh Buildcon. It was further submitted that the Revenue had made a substantive addition of the same ₹30 lakh in the hands of Shri Prabhat Kumar Tandon and that the Tribunal had subsequently quashed the Commissioner (Appeals)’ order in Shri Prabhat Kumar Tandon’s case (ITA No. 5417/Del/2025 dated 18.03.2026). According to the assessee, once the substantive addition had been deleted, no addition could be sustained with reference to Shri Pargat Singh. The Departmental Representative relied upon the orders of the lower authorities.

The Tribunal observed that the addition in the assessee’s hands was linked to transactions involving Shri Prabhat Kumar Tandon and Shri Pargat Singh. Since the substantive additions in Shri Prabhat Kumar Tandon’s case had already been deleted by the Tribunal, it held that no case for making any addition remained. The Tribunal also held that, in view of the Gujarat High Court decision in Shubh Buildcon, the Commissioner (Appeals) was not empowered to issue directions for initiating proceedings under Section 148 for AY 2018-19. Accordingly, grounds relating to these issues were allowed.

As a result, the Tribunal allowed the appeal for AY 2013-14 and partly allowed the appeal for AY 2019-20. The order was pronounced in open court on 29 May 2025.

FULL TEXT OF THE ORDER OF ITAT DELHI

These two appeals filed by the Assessee against the separate orders of Learned Commissioner of Income Tax (Appeals)-24, dated 30.10.2025 and 07.11.2025 arising out of assessment order passed by the DCIT, Central Circle-05, dated 01.09.2021 and 08.09.2021 under section 153A r.w.s. 143(3) and 154 of the Income Tax Act, 1961, pertaining to the Assessment Year 2013-14. The word ‘Act’ herein this order would mean Income Tax Act, 1961

2. Both the appeals are of the same assessee and therefore the same were heard together and for the purposes of convenience are being adjudicated by this common order.

ITA No.8474/Del/2025 AY 2013-14

3. The Assessee has raised the following grounds of appeal in ITA No.8474/Del/2025 for AY 2013-14:

1. That under the facts and circumstances, the impugned order u/s.154 r.w.s. 153A is unsustainable in law and outside the scope of Sec. 154, hence unsustainable in law.

2. That without prejudice to G.No.1, the issue of addition of Rs.27,11,491/- in impugned order U/s.154,since highly debatable, therefore could not had been considered and adjudicated in order U/s.154.

3. That the impugned order U/s. 154 is unsustainable in law for not taking the approval w/s. 153D since it makes substantive additions arising out of searched proceedings Uls.154.

4. That without prejudiceto G.No.3, even the alleged approval Us. 153D Dtd.01.06.21 is not as per law, mechanical, without application of mind, without going through the relevant records including being a single consolidate approval for 06Yrs is illegal, invalid and unsustainable in law.

5. That the findings of the Ld. A.O. since based on incorrect facts, incorrect figures and on the basis of un-confronted alleged adverse material and statements collected on the back of the assessee thereby not providing any opportunity of hearing on such issues and for rebutting the same, resulting into violation of principles of natural justice, makes the impugned asstt. order illegal and unsustainable in law as well as on facts.

6. That in the absence of any incriminating material found and seized from the assessee, on the issue of addition of Rs.27,11,491/-, as alleged commission income@ 0.25% of Net worth of 04 Cos. namely Prism Sales Pvt. Ltd., Swati Commodities Pvt. Ltd., Kamalkunj Commercial Pvt. Ltd. and Richfield Goods Pvt. Ltd. Totaling Rs. 1,08,45,96,517/-is outside the scope of proceedings u/s. 153A /154.

7. That under the facts and circumstances, being an unabated year, in the absence of any incriminating material found and seized during search, addition of Rs.27,11,491/-cannot be made in asstt. u/s. 153A/154.

8. That under the facts and circumstances, in view of the evidences and explanation furnished and the retraction made by various persons, immediately after search and the cross-examination of various persons including the statements recorded by A.O. during asstt., the adverse inference and the consequential addition of Rs.27,11,491/- is unjustified and unsustainable on merits.

9. That under the facts and circumstances, the impugned order U/s.154 being communicated on ITBA is unsustainable in law and should be deemed to never has been issued in the absence of quoting of Document Identification Number (DIN) in the body of asstt. order as mandated by CBDT Circular No.19/2019 Dtd. 14.08.19.

4. At the outset, ld. Counsel for the assessee submitted that the order u/s 153A r.w.s. 143(3) dated 24.06.2021 which was the basis for the order under section 154 dated 08.09.2021 and for the consequent appellate order dated 07.11.2025 has been quashed by a hon’ble Co-ordinate Bench of this Tribunal and that therefore the impugned order under section 154 dated 08.09.2021 has become infructuous.

5. Heard rival parties. Perused material available on record.

6. The ld. Counsel for the assessee took us through the brief factual matrix of the case. Order u/s 153A r.w.s. 143(3) dated 24.06.2021 was passed by the ld. AO in the case of the appellant assessee. This order was confirmed by the Ld. CIT(A) and got quashed by this Tribunal vide order in ITA No.8040/Del/2025 dated 23.03.2023 on account of deficient approval accorded under section 153D of the Act. Meanwhile, upon passing the order u/s 153A r.w.s. 143(3) dated 24.06.2021, the ld. AO noted that whereas he had in the draft assessment order deliberated upon an addition of Rs.27,11,491/- on account of some undisclosed commission income, the same got omitted to be included in the final order dated 24.06.2021(supra). Consequently, notice u/s 154 was issued to correct the above mistake. The appellant assessee challenged impugned order under section 154 before the Ld. First Appellate Authority, who did not concur with the assessee and proceeded to confirm the order under section 154. The assessee is in appeal before us against the said order of ld. CIT(A) dated 07.11.2025.

7. The ld. Counsel for the assessee, inter alia, vehemently argued that in view of the fact that the order u/s 153A r.w.s. 143(3) dated 24.06.2021 has been quashed by this Tribunal in terms of their order in ITA No.8040/Del/2025 dated 23.03.2023, the impugned order u/s 154 dated 08.09.2021 and consequent order of ld. CIT(A) dated 07.11.2025 has become infructuous and deserves to be set-aside.

8. The ld. DR would like to make us belief upon the correctness of the order of the lower authority.

9. An order u/s 154 is passed to rectify mistakes that have crept in an assessment order. Accordingly, order u/s 154 dated 08.09.2021 was passed to rectify mistakes available in order dated 24.06.2021. We are of the considered view that as a co-ordinate Bench of this Tribunal in their order in ITA No.8040/Del/2025 dated 23.03.2023, order u/s 154 dated 08.09.2021 would not survive mainly because the foundation ceases to exist. Accordingly, we set-aside and quash the order of Ld. CIT(A) dated 07.11.2025 and allow the appeal raised by the appellant assessee.

10. In the result, the appeal of the assessee in ITA No.8474/Del/2025 is allowed.

ITA No.8475/Del/2025 AY 2019-20

11. The assessee has raised following grounds of appeal for in ITA No.8475/Del/2025 AY 2019-20:-

1. That under the facts and circumstances, Ld. CIT(A) erred in law and on merits and exceeded her jurisdiction in directing and suggesting that the A.O. may reopen the case of A.Y.18-19 U/s.147/148 r.w.s.150 for examining the issue of addition of Rs.25,00,000/- for alleged unaccounted cash receipts from Sh. Pargat Singh.

2. That without prejudice, to G.No.1 in the absence of notice U/s.251(2) or otherwise confronting the assessee with the proposed findings resulting into adverse consequences relating to A.Y.18-19 [which was not before the Ld. CIT(A)], such findings for A.Y.18-19 are liable to be quashed since illegal, unwarranted and in gross violation of principles of natural justice.

3. That under the facts and circumstances, approval Us.153D, mechanical, without application of mind and without verification of relevant material etc and since not as per law, hence invalid and unsustainable in law.

4. That under the facts and circumstances, in the absence of availability and providing certificate Us.65B of The Indian Evidence Act, 1872, and in case it is available and if not as mandated U/s.65B, then, such electronic records and material generated there from cannot be used in impugned asstt. proceedings.

5. That under the facts and circumstances both the lower authorities erred in law as well as on merits in making and sustaining the addition to the extent of Rs.5.00.000/- U/s.69A for alleged cash receipt from Pargat Singh.

5.1. That without prejudice, under the facts and circumstances, Sec.69A is not applicable for the issue of addition of Rs.5,00,000/-.

6. That impugned asstt. issued on ITBA without quoting DIN No. in the body of asstt. order as mandated by CBDT Circular No.19/2019 Dtd.14.08.19 and for non-compliance of other mandatory requirements of said circular, the asstt. order should be held as never being passed, illegal and unsustainable in law.

12. At the outset, the ld. Counsel for the assessee submitted that it does not wishes to press grounds of appeal nos.3, 4 and 6. Accordingly, grounds of appeal no. 3, 4 and 6 are dismissed as not pressed.

13. The only issue that has arisen from the appeal of the assessee is regarding the addition of Rs.30 lakhs made in the hands of the assessee qua one Shri Pargat Singh. Thus, through ground of appeal no.1, 2 and 5, the appellant had contested the decision of the ld. CIT(A) in directing the AO to consider amount of Rs.25 lakhs, out of the total Rs.30 lakhs above, for taxation in AY 2018-19 u/s 148 and confirmation of the balance Rs.5 lakhs in the hands of the assessee. The Learned counsel took us through the brief factual matrix of the case. Returned declaring income of Rs.56,96,590/- was filed by the assessee on 17.10.2019, the ld AO had noted that a search and seizure action has been taken place in the case of one Shri Net Ram, etc. on 12.03.2019. During the search, name of a taxi driver Pargat Singh and Shri Prabhat Kumar Tandon surfaced. Electronic evidences comprising WhatsApp chats indicated that Shri Prabhat Kumar Tandon had given cash of Rs. 30 lakhs to Shri Pargat Singh, who had given the same to the assessee. The ld. AO treated this amount as unexplained money u/s 69A of the Act in the hands of the assessee. Before the ld. CIT(A), the assessee tried to indicate, without prejudice, that during the year under consideration maximum an amount of Rs.5 lakhs can be added as balance of Rs.25 lakhs pertain to AY 2018-19. The ld. CIT(A) directed the AO to consider taxing Rs.25 lakhs u/s 148 in AY 2018-19 and confirmed Rs.5 lakhs.

14. Contesting the impugned action of the ld. AO, the ld. Counsel for the assessee submitted that the directions of the ld. CIT(A) for reopening exercise qua AY 2018-19 are incorrect. Reliance was placed upon the decision of Hon’ble Gujarat High Court in the case of Shubh Buildcon 179 com 33 (Guj) mandating that no such directions can be legally given by the Ld. CIT(A). The ld. Counsel further argued that the Revenue had meanwhile, made addition in the hands of Shri Prabhat Kumar Tandon qua the said amount of Rs.30 lakhs on substantive basis. It was urged that the said addition in the hands of Shri Prabhat Kumar Tandon also travelled to this Tribunal which in its order in the case of Shri Prabhat Kumar Tandon vide ITA No.5417/Del/2025 dated 18.03.2026 has quashed the order of the ld. CIT(A) dated 08.08.2025. It was therefore argued that as the substantive addition itself has been deleted, there cannot be any case of making addition with reference to Shri Pargat Singh.

15. The ld. DR placed reliance upon the orders of the lower authorities.

16. Heard rival parties. Perused material on records.

17. We have noted that as the amount of Rs.30 lakhs, were added in the hands of the appellant assessee qua transactions with Shri Prabhat Kumar Tandon and Shri Pargat Singh. We have also noted that the impugned additions made on substantive basis in the hands of Shri Prabhat Kumar Tandon have also been deleted by this Tribunal. The addition made qua Shri Pargat Singh are intricately linked with the amounts received from Shri Prabhat Kumar Tandon. Accordingly, we are of the considered view that no case of any addition is made out. We are also of the considered view that in view of the decision of Hon’ble Gujarat High Court in the case of Subh Buildcon, the ld. CIT(A) was not empowered to issue any directions for invoking action u/s 148 for AY 2018-19. Accordingly, the grounds of appeal no.1, 2 and 5 of the assessee are allowed.

18. In the result, the appeal of the assessee is partly allowed.

19. Finally, the appeal of the assessee in ITA No.8474/Del/2025 is allowed and ITA No.8474/Del/2005 is partly allowed.

Order pronounced in the open on court on 29^th May, 2025.