USMAN JAINUDDIN SHAIKH,BEED V. JUSRISDICTION ASSESSING OFFICER, AURANGABAD

ITA 2356/PUN/2025

AI Insights

The case involves Usman Jainuddin Shaikh, the appellant, who contested the validity of a notice issued under section 148 of the Income Tax Act, 1961, for the assessment year 2016-17. The notice was challenged on several grounds, including the lack of a proper Digital Identification Number (DIN), absence of tangible material provided with the notice, and incorrect approval authority for the reassessment. The Tribunal found that the notice was issued without the necessary approval from the specified authority as required under section 151 of the Act, leading to the quashing of the notice and the reassessment proceedings.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841393 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 12-10-2025
• Other Referred Cases: Bhagwan Sahai Sharma Vs. DCIT, Alag Property Construction Private Limited Vs. ACIT, ITO Vs. Santosh Jaynarayan Sharma
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MILIND DEBAJI VIRTUAL
• Assessee Lawyers: ANAND PARTANI VIRTUAL
• Keywords: Set aside; Business income; Reassessment proceedings; Search and seizure; Competent authority; Tangible material; Presumptive income
• Section: 147; 148; 271(1)(c); 44AD; 12

Judgement Text

" आयकर अपीलीय अधिकरण ”एस एम सी” न्यायपीठ पुणे में। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE MS.ASTHA CHANDRA, JUDICIAL MEMBER AND DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपऩल सं. / ITA No.2356/PUN/2025 निर्धारण वषा / Assessment Year: 2016-17 Usman Jainuddin Shaikh, H.No.52, Mangalnath Colony, Majalgaon, Beed – 431131. V s Jurisdiction Assessing Officer. PAN: ESXPS3693L Appellant/ Assessee Respondent /Revenue Assessee by Shri Anand Partani (Virtual) Revenue by Shri Milind Debaji-JCIT(Virtual) Date of hearing 26/02/2026 Date of pronouncement 27/02/2026 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], passed under section 250 of the Income Tax Act, 1961 for the A.Y.2016-17 dated 14.08.2025 emanating from the Assessment Order passed under section 147 read with section 144B of the Income Tax Act, 1961 Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 2 dated 11.05.2023. The Assessee has raised the following grounds of appeal : “Under the facts and circumstances of the case and in the Law, the impugned notice under section 148 of the Act issued on 26.07.2022 is invalid and bad in law as the same has been issued without DIN and reason for issuing manual notice along with approval of appropriate authority mentioned as per Circular 19 of 2019 dated 14.08.2019 is not mentioned on the notice. 2. Without prejudice, under the facts and circumstances of the case and in the Law, the reassessment proceedings lack jurisdiction and are bad in law as the case of the appellant was reopened in pursuant to the search and seizure carried out in the case of Renukamata Multistate Urban Credit Co-op Society Limited (RMU Society) and therefore the case of the appellant ought to have been assessed under section 153C of the Act. 3. Under the facts and circumstances of the case and in law, the notice issued under section 148 of the Act is bad in law as the AO has not taken prior approval of the appropriate specified authority as specified in section 151 of the Act. Hence the reassessment proceedings are liable to be quashed. 4 Under the facts and circumstances of the case and in the Law, the impugned notice under section 148 of the Act issued on 26.07.2022 is invalid and bad in law as the same has been issued without DIN and reason for issuing manual notice along with approval of appropriate authority mentioned as per Circular 19 of 2019 dated 14.08.2019 is not mentioned on the notice. Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 3 8. Under the facts and circumstances of the case and in Law, the impugned notice issued under section 148 of the Act on 26.07.2022 is invalid and bad in law as it has been issued by JAO which is not in accordance with the Section 151A of the Act. 6. Under the facts and circumstances of the case and in the Law, the notice issued under section 148 of the income Tax Act 1961 is bad in law as no tangible material was provided to the appellant along with the notice u/s 148A(b) despite having specifically asked by the appellant. 7. Under the facts and circumstances of the case and in the Law, the Learned CITIA) erred in upholding the addition of Rs.4,28,927/- by estimating income of the appellant 8% of Rs. 53,61,594/- based on presumptions and surmises not backed by any tangible evidences, which deserves to be unwarranted and liable to be deleted. 8. Without prejudice, on the basis of facts and circumstances of the case and in law, the Ld. CIT(A) has erred in considering the 8% of the total receipts as income which is against the principle of real income theory and principle of reasonableness. Therefore, the assessment order is bad in law. 9. Under the facts and circumstances of the case and in the Law, the Learned AO erred in initiating the penal proceedings under section 271(1)(c) of the Income-tax Act, 1961. 10. The Appellant reserves its right to alter, amend, add and withdraw any grounds of appeal during the appellate proceedings.” Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 4 Submission of ld.AR : 2. Ld.AR submitted that Assessee is earning brokerage from sale of cotton bales and other agricultural products. Assessee only receives brokerage. 2.1 Ld.AR for the Assessee filed paper book. Ld.AR submitted that for A.Y.2016-17 order u/s.148A(d) of the Act, dated 26.07.2022 was approved by Principal Commissioner of Income Tax. Ld.AR submitted that since three years have lapsed from the end of A.Y.2016-17, as per Section 151(ii) approval of Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax was required. Ld.AR submitted that approval goes to root of the notice, hence, order u/s.148A(d) and notice u/s.148 both are bad in law. 2.2 Ld.AR relied on the case laws filed in the paper book. 3. The relevant paragraphs of ld.AR’s written submission are reproduced here as under : “The appellant's case pertains to Assessment Year (AY) 2016-17, and notice u/s 148 of the Act was issued on 17.06.2021, which falls beyond three years from the end of the relevant assessment year. In such cases, Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 5 as mandated by Section 151(ii) of the Income Tax Act, approval must be obtained from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General. However, while issuing the order under Section 148A(d) of the Act and notice u/s 148, the AO sought approval from the Principal Commissioner of Income Tax (PCIT). The order issued under Section 148A(d) is attached as Annexure-3 and notice under section 148 dated 17.06.2021 is enclosed as Annexure-4. The relevant portion of the notice u/s 148 is reproduced below: 4. Ld.AR also submitted that since in this case Assessing Officer has mentioned that ACIT, Central Circle forwarded information based on search conducted in the case of Shri Renukamatha Urban Credit Co-operative Society, notice u/s.153C should have been issued. Therefore, notice u/s.148 is void ab initio. Ld.AR relied on the decision of ITAT filed in the paper book. Submission of ld.DR : 5. Ld.DR for the Revenue appeared Virtually. Ld.DR relied on the order of Assessing Officer and ld.CIT(A). Findings & Analysis : 6. In this case, as per the assessment order, Assessee had filed Return of Income for A.Y.2016-17 declaring total income at Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 6 Rs.3,41,270/-. Assessing Officer issued notice u/s.148 and assessee filed Return of Income in response to notice u/s.148 on 20.08.2022 declaring total income at Rs.3,41,270/-. To understand the facts, the relevant paragraph of the assessment order is reproduced here as under : “4. In this case the assessee has submitted that the assessee \"used to act as a broker and transporter between farmers and textile industries, ginning and pressings, etc. for sale of cotton and cotton bales\". The assessee has submitted few affidavit of farmers from who he used to buy and sell cottons bales. In this case, the assessee has filed return of Income u/s 44AD of the Act and shown gross turn over amounting to Rs. 35,62,596 and shown presumptive income under the section 44AD @8% amounting to Rs. 3,51,272/-. However as per the deposits of the bank account maintained with M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society amounts to Rs. 89,24,190/-. The assessee has submitted that the is cash deposited on behalf of the farmers and he has only received brokerage or commission. The submission is not acceptable as the assessee is in trade of buying and selling of cotton bales and the total business shown by the assessee i.e deposits in bank amounts to Rs. 89,24,190/-. The definition of turnover is the total amount of money the business receives from the sale of goods and services and in this case the assessee has received Rs.89,24,190/- which the assessee should have shown as Gross turnover or gross receipt while filing return of Income. Here the assessee has clearly failed to do so. The assessee has only shown Rs. 35,62,596/- as gross turn over. Further how the assessee has arrived at such turnover is also not explained along with documentary evidences. Therefore the difference of turn over Rs.53,61,594 (i.e Rs. 89,24,190- Rs. 35,62,596) is proposed to be treated as undisclosed income of the assessee and taxed u/s 44AD @ 8%. In view of the above, Rs. 4,28,927 /- i.e 8% of 53,61,594 is treated as undisclosed business income of the assessee for the year under consideration. Penalty u/s 271(1)(c) of the Act is initiated for concealment of income. (Addtion: Rs. 4,28,927/-)” Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 7 6.1 In this case, we have studied the paper book filed by ld.AR for the Assessee. The notice u/s.148 for A.Y.2016-17 dated 26.07.2022 has been approved by Principal Commissioner of Income Tax, Nashik. The relevant notice is scanned and reproduced here as under : Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 8 6.2 Thus, for A.Y.2016-17, the notice u/s.148 has been approved by Principal Commissioner of Income Tax-1, Nashik. As per Section 151(ii) of the Income Tax Act, approval of Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax is required after a lapse of three years from the end of assessment year. 6.3 Therefore, in the case of Assessee, no proper approval has been obtained. 7. The Hon’ble Delhi High Court in the decision of Bhagwan Sahai Sharma Vs. DCIT [2025] 174 taxmann.com 916 (Delhi) vide order dated 14.05.2025 has held as under : “11. The AO issued a notice dated 29.07.2022 under Section 148 of the Act accompanied with the order dated29.07.2022 passed under Section 148A(d) of the Act. 12. It is apparent from the said notice that it was not issued with the prior approval of the Principal Chief Commissioner of Income Tax (PCCIT) or any other authority specified under Section 151(ii) of the Act. Such approval is mandatory for issuance of a notice issued under Section 148 of the Act beyond the period of three years from the end of the relevant assessment year. Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 9 13. Section 151 of the Act (as amended by the Finance Act, 2021) as in force on the date of issuance of notice reads as under: \"151. Sanction for issue of notice.- Specified authority for the purposes of section 148 and section 148Ashall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.\" 14. The question as to which would be the specified authority under Section 151 of the Act in respect of approval of notices under Section 148 of the Act that were issued pursuant to proceedings that were initiated under Section 148A of the Act prior to 30.06.2021 [the extended limitation under TOLA] has been considered by this Court in several cases including Twylight Infrastructure (P.) Ltd. v. ITO [2024] 158 taxmann.com 378(Delhi)/[2024] 463 ITR 702 (Delhi)/ 2024:DHC:259-DBand Abhinav Jindal HUFv. ITO [2024] 166taxmann.com 536 (Delhi)/2024:DHC:7238-DB. This Court has consistently held that TOLA would have no relevance for determining the specified authority whose approval was mandatory under Section 151 of the Act for issuance of a notice under Section 148 of the Act. We Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 10 consider it apposite to refer to the following extract from the decision of this court in Abhinav Jindal HUF(supra). The same is set out below: \"17. As was noticed in the introductory parts of this decision, the respondents had, contrary to the above, argued that once a notice for reassessment comes to be issued after the expiry of four years by virtue of the extended period of time made available by TOLA, all the impugned notices would fall within the ken of sub-section (2) of the pre-amendment Section 151 and consequently the sanction and approval accorded by the JCIT would be in accordance with law. *** *** *** 38. It would therefore be wholly incorrect to read TOLA as intending to amend the distribution of power or the categorisation envisaged and prescribed by Section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by Section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant AY or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant AY or thereafter. The bifurcation of those powers would continue unaltered and unaffected by TOLA. 39. The fallacy of the submission addressed by the respondents becomes even more evident when we weigh in consideration the fact that even if the reassessment action were initiated, as per the extended TOLA timelines, and thus after the period of four years, Section 151 incorporated adequate measures to deal with such a Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 11 contingency and in unambiguous terms identified the authority which was to be moved for the purposes of sanction and approval. Section 151 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time between the end of the relevant AY and the date when reassessment was proposed. Thus even if the reassessment was proposed to be initiated with the aid of TOLA after the expiry of four years from the end of the relevant AY, the authority statutorily empowered to confer approval would be the Principal Chief Commissioner /Chief Commissioner/principal Commissioner /Commissioner. It would only be in a case where the reassessment was proposed to be initiated before the expiry of four years from the end of the relevant AY that approval could have been accorded by the JCIT. Similar would be the position which would emerge if the actions were tested on the basis of the amended Section 151 and which divides the power of sanction amongst two sets of authorities based on whether reassessment is commenced within three years or thereafter.\" 15. The aforesaid issue is also covered by the earlier decisions of this Court in Cadence Real Estates (P.) Ltd.v. ITO [W.P.(C) 482/2023, dated 24-04-2025]; Twylight Infrastructure (P.) Ltd. (supra) as well as the decision in the case of Ganesh Dass Khanna v. ITO [2023] 156 taxmann.com 417/460 ITR 546 (Delhi)/2023:DHC:8187-DB. 16. In Twylight Infrastructure (P.) Ltd. (supra), this Court had held as under: \"12. Clearly, the revenue advanced the argument of interlinkage between limitation and the ascertainment of the specified authority due to the plain language of the amended Section 151 Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 12 of the Act. Section 151,when read alongside the first proviso to Section 148, brings the aspect of inextricable linkage to the fore. 12.1. Clauses (i) and (ii) of Section 151 of the amended Act (which has been extracted hereinabove)clearly specify the authority whose approval can trigger the reassessment proceedings. Thus, if three (3)years or less have elapsed from the end of the relevant AY, the specified authority who would grant approval for initiation of reassessment proceedings will be the Principal Commissioner or Principal Director or Commissioner or Director. However, if more than three (3) years from the end of the relevant AY have elapsed, the specified authority for according approval for reassessment shall be the Principal Chief Commissioner or Principal Director General or, where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. 12.2. That the approval is mandatory is plainly evident on perusal of the first proviso appended to section148 of the Act. The said proviso, at the risk of repetition, reads as follows: \"Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.\" 12.3. In these cases, there is no dispute that although three (3) years had elapsed from of the end of the relevant AY, the Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 13 approval was sought from authorities specified in clause (i), as against clause (ii) of Section 151.\" 12.4. Before us, the counsel for the Revenue continue to hold this position. The only liberty that they seek is that if, based on the judgment in Ganesh Dass Khanna [Ganesh Dass Khanna v. ITO, (2024) 460ITR 546 (Delhi); 2023 SCC OnLine Del 7286; Ganesh Dass Khanna v. ITO [2023] 156 taxmann.com417/460 ITR 546 (Delhi)/Ganesh Dass Khanna v. ITO [2023] 156 taxmann.com 417/460 ITR 546(Delhi)/2023: DHC:8187-DB.], the impugned orders and notices are set aside, liberty be given to theRevenue to commence the reassessment proceedings afresh. 13. Therefore, having regard to the aforesaid, the impugned notices and orders in each of the above captioned writ petitions are quashed on the ground that there is no approval of the specified authority, as indicated in section 151(ii) of the Act. The direction is issued with the caveat that the Revenue will have liberty to take steps, if deemed necessary, albeit as per law.\" 17. In the recent decision of Communist Party of India (Marxist) v. Income Tax Department [2025] 174taxmann.com 925 (Delhi)/ W.P.(C) 9031/2023 decided on 28.04.2025, this Court had referred to the earlier decisions including the decision rendered by the Bombay High Court in J M Financial & Investments Consultancy Services (P.) Ltd. v. ACIT [W.P. No. 1050 of 2020, dated 04-04-2022] and Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154 taxmann.com 159 (Bombay)/[2023] 457 ITR 647 / 2023 SCC OnLineBom 2822 ; the Madras High Court in Ramachandran Shivan v. ITO [W.P. No.8570 Of 2023, dated 4-3-2024]and other connected matters, decided on Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 14 04.03.2024 and the Orissa High Court in Ambika Iron and Steel (P.)Ltd. v. Pr. CIT [2023] 452 ITR 285 (Ori.)/2022 SCC OnLine Ori 4162 and had noted that the question as to which is the specified authority whose approval is mandatory, would depend on whether the notice under Section 148 of the Act was issued within a period of three years from the end of the relevant assessment year or thereafter. 18. In view of the above, the impugned notice is liable to be set aside on this ground alone. 19. The impugned notice is, accordingly, set aside. Thus, proceedings initiated pursuant to the said notice are also set aside. 20. The petition is allowed in the aforesaid terms.”Unquote. 8. The Hon’ble Bombay High Court in the case of Alag Property Construction Private Limited Vs. ACIT in Writ Petition No.3938 of 2022 order dated 08.09.2025, has quashed the notice u/s.148 dated 23.08.2022 which was issued with the approval of Principal Commissioner of Income Tax, Mumbai-6, for Assessment Year 2017-18. 9. Assessee also relied on the decision of ITAT Pune of ITO Vs. Santosh Jaynarayan Sharma in ITA No.2324/PUN/2025 for A.Y.2017-18 vide order dated 06.01.2026 wherein ITAT Pune has held as under : Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 15 “24. Since the notice has been issued beyond the period of three years from the end of the relevant assessment year, therefore, in view of the provisions of section 151, the competent authority for granting the approval for issue of notice u/s 148 of the Act is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Since the approval in the instant case has been granted by the PCIT instead of any of the above authorities, therefore, such approval being not in accordance with law, the re-assessment proceedings are invalid.” 10. Respectfully following the judicial precedence, we quash the notice u/s.148 of the Act, which has approved by Principal Commissioner of Income Tax-1, Nashik after a lapse of three years from the end of Assessment Year 2016-17. Accordingly, Ground No.3 raised by the Assessee is allowed. Since we have allowed the Ground No.3 of the Assessee, all other grounds become academic. Accordingly, all other grounds are dismissed as unadjudicated. 11. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 27 February, 2026. Sd/- Sd/- ASTHA CHANDRA Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 27 Feb, 2025/ SGR Printed from counselvise.com ITA No.2356/PUN/2025 for A.Y.2016-17 [A] 16 आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : 1. अपऩलधर्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. नवभधगऩयप्रनिनिनर्, आयकर अपऩलऩय अनर्करण, “एस एम सऩ” बेंच, पपणे / DR, ITAT, “SMC” Bench, Pune. 6. गधर्ाफ़धइल / Guard File. आदेशधिपसधर / BY ORDER, / / TRUE COPY / / सहधयक रनिस्ट्रधर /Assistant Registrar आयकर अपऩलऩय अनर्करण, पपणे/ITAT, Pune. Printed from counselvise.com "