Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income Tax, ... vs Pradeep Kumar Agrawalla, Delhi on 28 April, 2026
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ITA No.6158 & 6959/Del/2025
Pradeep Kumar Agarwalla (AY 2021-22)
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH, DELHI
BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER
&
SHRI VIMAL KUMAR, JUDICIAL MEMBER
ITA No. 6158/Del/2025
(Assessment Year: 2021-22)
Pradeep Kumar Agarwalla Vs. DCIT
32, Ferozshah Road, New Central Circle 25
Delhi G.P.O New Delhi Delhi
110001
थायीले खासं . /जीआइआरसं . /PAN/GIR No: AKRPA 7170L
Appellant .. Respondent
ITA No. 6959/Del/2025
(Assessment Year: 2021-22)
DCIT Vs. Pradeep Kumar Agarwalla
Central Circle 25 32, Ferozshah Road, New
Delhi Delhi G.P.O New Delhi
110001
थायीले खासं . /जीआइआरसं . /PAN/GIR No: AKRPA 7170L
Appellant .. Respondent
Appellant by : Sh. Salil Kapoor, Adv,
Sh. Sumit Lal Chandani, Adv.,
Ms. Soumya Singh, Adv. &
Ms. Sakshi Rustagi, Adv.
Respondent by : Sh. Mahesh Kumar, CIT(DR)
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ITA No.6158 & 6959/Del/2025
Pradeep Kumar Agarwalla (AY 2021-22)
Date of Hearing 10.03.2026
Date of Pronouncement 28.04.2026
ORDER
PER VIMAL KUMAR, JM:
The cross appeals filed by the assessee and Department of Revenue are against the order dated 24.07.2025 of the Ld. Commissioner of Income Tax (Appeals)-29, New Delhi (hereinafter referred to as "Ld. CIT(A)"), u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), arising out of assessment order dated 11.02.2023 of the Ld. Assessing Officer/DCIT Central Circle-25, Delhi (hereinafter referred to as "Ld. AO"), u/s 143(3) of the Act for Assessment Year 2021-22.
2. Brief facts of the case are that, assessee filed return u/s 139(1) of the Act declaring total income of Rs.1,19,74,370/- on 31.03.2022. The Assessee is heading Galaxy Group (Sawasdee Group), which was established in 2008.
The assessee had started Diamond business in Bangkok during year 1990, and is associated with diamond trading activities, operating from Bangkok, Belgium and Mumbai as non-resident. Post coming back to India, assessee started filing his ITR as R&NOR from AY 2016-17 and from AY 2018-19 and started filing his ITR as resident. The group has considerable presence in P a g e |3 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) real estate sector in Delhi/NCR. A. search was conducted u/s 132 of the Act on the Galaxy Group on 17.11.2021. Accordingly, the assessee was also covered under the search and seizure operation under section 132 of the Act.
2.1. The case of assessee was centralized to the office of AO in pursuance of order passed u/s 127 of the Act dated 06.02.2022 by the PCIT-10, Delhi.
The case of the assessee was selected for compulsory scrutiny in pursuance of CBDT notification no F.No.225/81/2022/ITA-II dated 03.06.2022 as per para no 2.2 for compulsory selection of returns for complete scrutiny in FY.
2022-23. Notices u/s 143(2) of the Act dated 29.06.2022 was issued. General questionnaire vide notice u/s 142(1) of the Act dated 22.07.2022 was issued.
Assessee filed reply on 08.12.2022 and 13.01.2023.
2.2. First questionnaire mentioned findings of search and confronting incriminating materials seized from the residential and business premises of Assessee, was issued vide notice u/s 142(1) of the Act dated 12.11.2022.
Assessee did not respond to any issue. Reminder was issued vide notice u/s 142(1) of the Act dated 27.01.2023. Assessee did not respond. Finally, show cause notice dated 02.02.2023 was issued. Assessee submitted reply dated P a g e |4 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) 10.02.2023, raising numerous concerns accompanied with an email containing the retraction of Sh. Rajnish Jain.
2.3. On completion of proceedings Ld. AO vide order dated 11.02.2023 made additions of Rs.5,43,30,338/-, Rs.3,42,54,938/- and Rs.50,00,000/-.
3. Against order dated 11.02.2023 of Ld. AO, the assessee filed appeal before Ld. CIT(A) which was partly allowed. Addition of Rs.5,43,30,338/-
was confirmed and additions of Rs.3,42,54,938/- and Rs.50,00,000/- were deleted.
4. In ITA No.6158/Del/2025, the assessee raised following grounds of appeal:
1. That in view of the facts and circumstances of the case and in law, the assessment framed under Section 143(3) of the Income-tax Act, 1961 ("the Act") is illegal and void, as the mandatory jurisdictional conditions prescribed under Sections 148 and 148B, read with Explanation 2 thereto, were not complied with. The entire reassessment proceedings are thus vitiated and liable to be quashed.
2. That in view of the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the Assessing Officer wrongly assumed jurisdiction under Section 143(2), without invoking the correct provisions applicable in a search related case, thereby rendering the entire assessment order and the additions made therein, illegal, bad in law and without jurisdiction.
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3. That in view of the facts and circumstances of the case and in law, the Assessing Officer has erred in assuming jurisdiction and passing order without complying with the mandatory procedural safeguards prescribed under Section 151 of the Act. The assumption of jurisdiction to pass the assessment order in the facts of the present case, are therefore without valid sanction and are bad in law, being void ab initio and without jurisdiction.
4. That in view of the facts and circumstances of the case and in law, without prejudice, the learned CIT(A) has failed to appreciate that the approval obtained by the Assessing Officer from the Additional CIT for passing the assessment order under Section 143(3) is non est and mechanical, contrary to the statutory mandate, and does not confer validity on the impugned assessment.
5. That in view of the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the assessment order dated 11.02.2023 is time- barred, since the limitation period under Section 153(1) for AY 2021-22 expired on 31.12.2022. The assessment framed beyond the statutory limitation is void ab initio.
6. That in view of the facts and circumstances of the case and in law, the assessment order dated 11.02.2023 passed under section 143(3) of the Act is illegal, bad in law and liable to be quashed as the same has been passed in contradiction to CBDT Circular No. 10/2019 dated 14.08.2019.
7. That in view of the facts and circumstances of the case and in law, no incriminating material was found during the search conducted on the assessee, and the impugned additions have been made solely on the basis of alleged third-party digital data, which is impermissible in law. The assessment order is thus vitiated.
8. That, in view of the facts and circumstances of the case, the assessment order passed by the Deputy Commissioner of Income Tax, Central Circle 25 is illegal, bad in law and without jurisdiction as no valid order u/s 127 of the Act was passed.
P a g e |6 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22)
9. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 5,43,30,338/-under Section 69A of the Act, even though the same is based solely on the statement of Shri Rajnish Jain, which stood retracted as having been obtained under duress and coercion, and without any corroborative evidence.
10. That in view of the facts and circumstances of the case and in law, the reliance placed by the Assessing Officer on alleged "cash ledger sheets" seized during the search is misconceived, since the said loose sheets are dumb documents, not maintained in the regular course of business, and cannot be treated as books of account or as conclusive evidence against the Appellant in the absence of any independent corroboration.
11. On the facts and circumstances of the case and in law, the addition under Section 69A is misconceived as no money, bullion, jewellery, or valuable article was found or seized from the Appellant, which is a sine qua non for invoking Section 69A.
12. On the facts and circumstances of the case and in law, the authorities below have erred in mechanically applying the provisions of Section 115BBE to the impugned addition without first establishing the essential preconditions for invoking Section 69A of the Act. In any case, the provisions of Section 115BBE of the Act are not applicable.
13. That in view of the facts and circumstances of the case, the addition made is based on surmises and conjectures, without bringing enough evidence on record. Hence, the addition made is illegal, bad in law and highly excessive. The addition made cannot be justified by any material available on record.
14. That in the view of the facts and circumstances of the case, the documents, explanation filed by the Appellant and the material available on record has not been properly considered and judicially interpreted and has been wrongly ignored.
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15. That the material collected at the back of the Appellant and used by the Assessing Officer to make the disallowance, is not confronted to the Appellant and as such the disallowance made are illegal and bad in law.
16. That in view of the facts and circumstances of the case, the CIT(A) has erred on the facts and in law in upholding by charging interest under section 234A/234B/234C/234/234D of the Act. The interest has been also wrongly worked out.
5. In ITA No.6959/Del/2025, the Department of Revenue raised following grounds of appeal:
a. Whether the Ld. CIT(A) has justified in allowing the appeal of the assessee only on technical ground and not considering the merit of the assessment order.
b. The Ld. CIT (A) did not appreciated the fact that the whatsapp chat revealing the transaction of Rs.50,00,000/- was never denied by the assessee it is an admitted fact that assessee is a party to these whatsapp chats, which is evidenced as incriminating in nature, and without bringing forth any clue, detail and/or substantiating proof of such transaction, narrative only cannot be considered as proof or substantiation thereof. Hence, decision on this ground is not acceptable and further appeal is recommended on the issue in the case.
c. The Ld. CIT (A) did not appreciated the fact that the findings, of search proceedings on the assessee as well as the Galaxy Group, establishes that the assessee along with associated entities was indulged in accepting huge cash, out of books, booked bogus expenses, and taking bogus accommodation entries aggregating "routing the unexplained money" in parallel black economy of entire Galaxy Group willingly to evade taxes as per the requirement of his beneficiaries. Hence, the addition of unexplained Expenditure booked in the A/c or ledger should not be equalized with the credit found unexplained. Hence, the decision on the issue in respect of deletion of addition of Rs. 3,42,54,938/- is not acceptable in the case and further appeal is recommended on this ground.
d. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
e. The grounds of appeal are without prejudice to each other.
f. That the appellant craves to add, amend, after or modify any grounds of appeal at the time of hearing.
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6. Ld. Authorized Representative for appellant-assessee submitted that assessment order dated 11.02.2023 u/s 143(3) of the Act is illegal, null and void as the mandatory jurisdiction conditions prescribed u/s 148 and 148B read with explanation 2 were not complied with.
6.1. Reliance was placed on order dated 29.12.2025 of Hon'ble ITAT Delhi in ITA no.5458/Del/2025 titled as Montage Enterprises Pvt. Ltd. Vs. DCIT/ACIT.
7. Ld. Departmental Representative submitted that Ld. AO had passed order in pursuance to CBDT notification dated 03.06.2022 providing compulsory selection of returns for complete scrutiny.
8. From examination of record, in light of aforesaid rival contention, it is crystal clear that, as per assessment order dated 11.02.2023 u/s 143(3) the case of assessee was selected for compulsory scrutiny in pursuance to CBDT notification dated 03.06.2022 containing para 2.2 for compulsory selection of returns for complete scrutiny. A search was conducted u/s 132 on 17.11.2021.
A coordinate Bench in order dated 29.12.2025 of Hon'ble ITAT Delhi in ITA no.5458/Del/2025 titled as Montage Enterprises Pvt. Ltd. Vs. DCIT/ACIT read as under:-
P a g e |9 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) These assessee's and Revenue's cross appeals ITA No.5458/Del/2025 and 5906/Del/2025 for assessment year 2022-23, arises against the Commissioner of Income Tax (Appeals)-3 [in short, the "CIT(A)"], Noida's order dated 30.07.2025 passed in case no. CIT(Appeals), Noida-3/10126/2021-22, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
Heard both the parties. Case files perused.
2. We notice at the outset that there arises the first and foremost issue of validity of the impugned section 143(3) assessment itself framed by the learned DCIT, Central Circle-II, Noida as per the assessee's pleadings in its appeal ITA No.5458/Del/2025. A combined perusal of both these case files indicates that the assessee/appellant is engaged in the business of manufacturing and sale of flexible packaging material etc. It has filed its return for the impugned assessment year 2022-23 on 29.10.2022, declaring loss of Rs.64,53,88,702/-. And the same was taken for scrutiny. The learned departmental authorities thereafter carried out section 132 search action as well as section 133A survey in its case on 21.02.2023. There is further no dispute that the learned Assessing Officer then proceeded to frame the impugned assessment on 30th March, 2024 in its case inter alia making various disallowances/additions etc., involving varying sums, which stand partly upheld in the CIT(A)'s lower appellate discussion.
3. It is in this factual backdrop that the assessee seeks to raise it's precise question challenging validity of the impugned assessment for the sole reason that the same ought to have been framed under section 148 with approval under section 148B of the Act in light of Homelife Buildcon (P.) Ltd. Vs. DCIT, (2025) 176 taxmann.com 614 (Chandigarh - Trib.) as relied in Jamna Das Nikkamal Jain Saraf Pvt. Ltd. Vs DCIT (ITA No. 403/Chd./2025) decided on 04.11.2025, adjudicating the very issue against the department as under:
"11.4 In conclusion, it was submitted that since the year under appeal formed part of the three assessment years immediately preceding the year in which search was conducted, the assessment ought to have been framed under section 148 with approval u/s 148B. The framing of the assessment u/s 143(3) and approval taken only for the purposes of section 143(3) was thus asserted to be fundamentally defective, non-compliant with statutory mandate, and consequently void ab initio. On these grounds, following the ratio in Homelife Buildcon Pvt. Ltd., it was prayed that the impugned assessment be quashed.
12. The Ld. CIT-DR Shri Manav Bansal opposed the contention, stating that the return for A.Y. 2022-23 was filed prior to the date of search, and validly selected for scrutiny under CASS. The AO was competent to complete the assessment u/s 143(3).
P a g e | 10 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) 12.1 He contended that section 148B applies only to "re-assessment" and not to "regular assessments." The AO's approval from Addl. CIT, being in line with the CBDT Instruction No. 7/2022 dated 15.07.2022, fulfils the supervisory requirement. The DR also submitted that Homelife Buildcon is distinguishable, as the AO therein relied on third-party search data, whereas the present case is based on assessee's own seized material.
13. We have carefully considered the rival submissions and perused the record. It is undisputed that search u/s 132 was conducted on 24.11.2022, relevant to A.Y. 2023-24. Thus, A.Y. 2022-23 is one of the three preceding years under Explanation 2(iv) to section 148. The Explanation reads that if a search is initiated, "the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated."
13.1 Therefore, the only permissible statutory course was to issue notice u/s 148 and obtain prior approval u/s 148B before passing assessment order.
13.2 As the Assessing Officer completed the assessment under section 143(3) of the Act without issuing the notice under section 148 of the Act. Therefore, the question before us is whether the assessment proceedings initiated under section 143(3) of the Act can be validly continued and completed after a search under section 132 has been conducted in the case of the same assessee, without following the procedure prescribed under section 148 (Explanation 2) of the Act.
13.3 In our considered opinion, the answer lies in the scheme of the Act itself. Section 143 provides the general framework for regular assessment, whereas sections 147-148 (post-2021 regime) deal with reassessment based on information suggesting escapement of income, including that unearthed during a search.
13.4 A plain reading of section 143(2) shows that such notice can be issued only when a return of income is furnished under section 139 or in response to a notice under section 142(1). It empowers the Assessing Officer to scrutinize that return if he considers that income has been understated or tax underpaid. However, when a search under section 132 takes place and materials are found indicating possible escapement of income, the statute envisages a different route for carrying out assessment or reassessment under section 147 read with section 148, which is the special mechanism for bringing to tax the income discovered in consequence of a search.
13.5 Although section 148 (inserted w.e.f. 01.04.2021) does not begin with a non-obstante clause similar to the erstwhile section 153A, its context and P a g e | 11 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) Explanation 2 make it clear that where a search is initiated, the jurisdiction thereafter must flow through this special channel, subject to prior satisfaction and approval of the Principal Commissioner or Commissioner. The legislative intent is to ensure that when a search is carried out, the assessment is framed under the specific provisions meant for such cases and not under the general provision of section 143(3). Further we may mention that no notice under section 143(2) could have been issued after 3 months from the from the end of the financial year in which the return is furnished. In the present case the original return of income was filled on 4/11/2022 for the assessment year 202223 and 143 (2) was issued on 21/6/2023 , therefore also the assessment was framed under 143(3) of the Act is not sustainable. In other words the time required for issuing the notice under 143(2) had already expired, and the revnue can not be allowed to issued issue 143(2) on 21.6.2023 after the search was carried out and notice had been issued on 21.6.2023 and assessment was framed under 143(3) of the Act. The relevant portion of section 143(3) reads as under:-
143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be issued after the expiry of three months from the end of the financial year in which the return is furnished.
13.6 This position finds substantial support from the ratio of various decisions of Hon'ble High Court and Hon'ble Supreme Court. The Courts unanimously held that once a search has been conducted and proceedings are triggered under section 153A, the Assessing Officer cannot continue parallel proceedings under section 143(3) or section 147 for the same assessment year, because the entire assessment for that year stands merged in the search assessment. The Courts emphasized that the existence of a special procedure for assessment consequent to a search is a complete code in itself; therefore, ordinary assessments abate and cannot coexist with the search-based assessment.
13.7 Drawing this analogy to the current regime, it is evident that when a search takes place and information is unearthed suggesting escapement of income, the Assessing Officer must act under section 148 (which now performs the role P a g e | 12 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) formerly assigned to section 153A) rather than continuing with a pending section 143(3) proceeding. The legislative intent remains the same -- to prevent multiplicity of proceedings and ensure that only one comprehensive order is passed, factoring in both the pre-search and postsearch materials.
13.8 The rationale is further reinforced by the well-settled principle of generalia specialibus non derogant -- the special provision overrides the general. Section 148 (as a special provision triggered by search information) must prevail over section 143 (the general provision for regular scrutiny). Allowing the Assessing Officer to continue and conclude proceedings under section 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the Principal Commissioner, redundant.
13.9 Accordingly, we hold that once a search is initiated under section 132 and material is found relating to the assessee, the pending assessment under section 143(3) cannot validly continue, as the time for issuing the 143(2) in response to original return of income had already expired, therefore the Assessing Officer must necessarily proceed in accordance with the special provisions contained in section 148 of the Act."
4. Learned CIT(DR) representing the Revenue vehemently supports the impugned assessment that the Assessing Officer had rightly finalized the same under the normal provision once the entire issue was pending before him as on the date of search.
5. We have given our thoughtful consideration to the assessee's and the Revenue's foregoing vehement submissions. We find merit in the assessee's legal ground herein once the impugned search had taken place in its case, no normal assessment under section 143(3) of the Act could have been framed in light of the tribunal's foregoing twin decisions going against the department. We thus adopt the above extracted reason mutatis mutandis to quash the impugned assessment framed by the learned Assessing Officer on 30th March, 2024 in very terms.
9. In view of above material facts especially search dated 17.11.2021 and passing of assessment order dated 11.02.2023 u/s 143(3) of the Act and by P a g e | 13 ITA No.6158 & 6959/Del/2025 Pradeep Kumar Agarwalla (AY 2021-22) following the judicial precedent it is held that the assessment order being illegal is set aside.
10. Therefore, ground of appeal No.1 of the assessee is accepted.
10.1 Remaining grounds of appeal Nos.2 to 16 of assessee and Grounds of appeal Nos. a to f of revenue being academic are left open.
11. In the result, the appeal ITA No.6158/Del/2025 of assessee is allowed and revenue's cross appeal No. ITA No.6959/Del/2025 is dismissed.
Order pronounced in the open court on 28.04.2026 Sd/- Sd/-
(S. Rifaur Rahman) (Vimal Kumar)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 28.04.2026
*Mittali, Sr. PS
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI