The Delhi High Court has ruled in favour of the Income Tax Department in a significant case involving reassessment proceedings against Agroha Fincap Ltd., overturning the Income Tax Appellate Tribunal’s (ITAT) earlier order which had quashed the reassessment.
The Bench of Justice V. Kameswar Rao and Justice Vinod Kumar held that the approval granted by the Principal Commissioner of Income Tax (PCIT) for reopening the assessment satisfied the legal requirements under Section 151 of the Income Tax Act, 1961. The court concluded that the ITAT erred in treating the approval as “mechanical” and declared the Tribunal’s July 7, 2023 order invalid.
The controversy dates back to Assessment Year 2009-10 when Agroha Fincap Ltd. declared an income of ₹40,720. Later, on the basis of investigation reports concerning the S.K. Jain group—alleged entry operators providing bogus share capital and premium through shell companies—the Revenue alleged that Agroha Fincap had introduced ₹25 lakh as unexplained share capital via accommodation entries.
The Assessing Officer (AO) reopened the assessment in 2016, adding the disputed ₹25 lakh under Section 68 of the Act along with related expenditure, enhancing the taxable income to ₹25.85 lakh. The assessee’s objections were rejected, and subsequent appeals before the National Faceless Appeal Centre also failed.
However, the ITAT, while hearing the case, quashed the reassessment proceedings, observing that the PCIT’s approval for reopening merely stated, “Yes, I am convinced it is a fit case for reopening”, which it considered mechanical and not in line with the Delhi High Court’s precedent in N.C. Cables Ltd. (2017).
The department argued that Agroha Fincap was clearly a beneficiary of accommodation entries provided by the S.K. Jain group and that the Assessing Officer had detailed sufficient reasons for reopening the case. He emphasized that unlike in N.C. Cables Ltd., the approval here reflected the authority’s satisfaction and was not a mere ritual.
The assessee contended that the ITAT had rightly quashed the reassessment since the assessee was not provided copies of crucial documents, nor given the opportunity to cross-examine persons whose statements were relied upon. The defence insisted that the approval lacked proper application of mind, rendering the entire proceeding invalid.
The High Court examined whether the language used in granting approval—“Yes, I am convinced it is a fit case for reopening of assessment under Section 147 by issuing notice under Section 148”—met statutory requirements. Referring to its earlier ruling in PCIT v. Meenakshi Overseas Pvt. Ltd., the Bench held that such wording demonstrated the authority’s application of mind and satisfied the mandate of Section 151.
The Court clarified that while N.C. Cables Ltd. had struck down approvals marked only as “approved,” this case was distinguishable since the PCIT’s note went further, reflecting satisfaction in clear terms.
The Court set aside the ITAT’s decision and restored the Revenue’s reassessment order.
Case Details
Case Title: M/S Agroha Fincap Ltd. Versus PCIT
Case No.: ITA 60/2024
Date: 06.10.2025
Counsel For Petitioner: Vipul Agrawal, SSC
Counsel For Respondent: Arvind Kumar
