ITAT Deletes Entire 4.11 Crore Addition Due to Incompetent Reopening Approval

The ITAT Delhi quashed the reassessment against the company as the reopening approval was taken from an incompetent authority. Consequently, the reassessment and additions were held invalid, the department’s appeal was dismissed, and the assessee’s cross-objection was allowed.

The Income Tax Department has filed the present appeal in the Income Tax Appellate Tribunal (ITAT), Delhi, against a company named Ruptex Mineral Water Private Limited, challenging an order dated March 10, 2025, passed by the CIT(A)/NFAC, Delhi. The case is related to the Assessment Year 2017-18. The company had also filed a cross-objection against the same order. The impugned order had partly allowed the company’s appeal against a reassessment order passed by the tax department.

The company initially declared its total income, amounting to Rs. 60.97 lakh, in its ITR. In conclusion to the survey conducted in April 2018 on certain other entities, the Assessing Officer (AO) alleged the company to be involved in providing accommodation entries of sale and purchase bills to various beneficiaries from many paper entities deposited in the bank accounts of these entities. As a result, the AO made an addition of around Rs. 4.11 crore to the assessee’s income.

When approached by the Commissioner of Income Tax (Appeals), the CIT(A) partially ruled in favour of the assessee and restricted the addition to approximately Rs. 43.09 lakh and also deleted a separate addition of commission expenses. The Income Tax Department, not satisfied with the action of CIT(A), filed an appeal before the ITAT Delhi, while the assessee filed a cross-objection challenging even the reduced addition.

During the proceedings, the assessee highlighted a key argument that the notice for reopening the assessment was issued three years after the end of the relevant assessment year. As per the law, these types of cases require approval from a higher authority like the Principal Chief Commissioner or Chief Commissioner. However, in the present case, approval was only taken from the Principal Commissioner, who was not the competent authority under the law.

When the tribunal analysed the arguments of both sides, it agreed with the arguments raised by the assessee, citing earlier judgements of the Delhi High Court and ITAT. The tribunal held the reassessment notice and subsequent proceedings invalid due to improper approval. In conclusion, it quashed both the impugned appellate order and reassessment order and also the addition made under the same. Accordingly, the appeal of the Department was dismissed, and the assessee’s cross objection was allowed.