The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed two assessments against a company on procedural grounds and granted partial relief in a third and held that amounts already assessed in the company’s hands could not also be added to the director’s income without reconciliation.

The Bench of Satbeer Singh Godara (Judicial Member) and Sanjay Awasthi (Accountant Member) found that the company had not established the full source to the satisfaction of the lower authorities, but that its explanation could not be rejected entirely. It restricted the addition to ₹2 lakh, giving the company relief of ₹5.68 lakh on this issue.

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The company challenged the validity of a notice issued under Section 148 of the Income Tax Act on July 25, 2023. According to the order, the notice asked the company to file its return within 30 days of service. The company argued that the provision applicable at the time required a minimum period of 90 days.

Accepting the procedural objection and following an earlier Tribunal decision, the Bench quashed the reopening. It therefore did not examine the remaining grounds in that appeal.

The order contains an apparent drafting inconsistency: while its account of the company’s argument says the notice allowed 30 days, a later paragraph describes it as “granting 90 days” before concluding that the time allowed fell short of the statutory period. The Tribunal’s stated conclusion was to quash the reopening.

The dispute for assessment year 2022–23 concerned the procedure followed after a search at the company’s premises on December 12, 2022. The Assessing Officer completed a regular assessment under Section 143(3) on March 31, 2024.

The company argued that, following the search, the officer should have initiated proceedings under Section 148 instead. The Tribunal noted that the search was acknowledged in the assessment order and that the Revenue had not disputed this fact.

Following its decision in Montage Enterprises (P) Ltd. v. DCIT, the Bench held that the regular assessment could not stand in these circumstances. It quashed the March 31, 2024 assessment without ruling on the other issues raised on its merits.

For assessment year 2023–24, the company contested the disallowance of ₹28 lakh in purchases described by the tax authorities as bogus. The Tribunal observed that the company’s corresponding sales had not been questioned. It also considered the possibility of purchases from unregistered dealers.

Given the facts of this case, the Bench held that a gross profit addition of 5% of the disputed purchases, or ₹1.4 lakh, would be appropriate instead of disallowing the entire ₹28 lakh. It expressly said that this estimate should not be treated as a precedent.

The company also challenged an addition of ₹7.68 lakh relating to seized cash. It attributed the amount to cash in hand and regular business sales recorded in its books.

In the connected appeal, director challenged additions of ₹46 lakh and ₹15 lakh, contending that the same amounts had already been assessed in the company’s hands.

The Tribunal said that, if the amounts had already been added to the company’s income, adding them again in the director’s case would amount to double addition. It directed the Assessing Officer to verify and reconcile the position afresh and make the consequential computation in accordance with law. The director’s appeal was allowed for statistical purposes; the order does not itself establish that both additions have been finally deleted.

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