Section 149: is the fifty lakh seen at reopening or at the appeal stage?

An Assessing Officer reopens eight years, assesses a ninth under section 143(3), and adds Rs 40.78 crore of unaccounted purchases across the nine. Being careful, he also adds the profit he thinks is buried in those purchases, which across the nine years comes to Rs 17.45 lakh.

The second addition destroyed the first.

In JCIT (OSD), Central Circle Dehradun v. Ramesh Kumar, decided on 1 September 2026, ITAT Delhi held that by taxing the margin the Assessing Officer had accepted that the purchases were turned over in the business rather than retained, so the only thing capable of being called income chargeable to tax was the margin. For five of the nine years the margin was a few lakh rupees. The fifty lakh gateway in section 149(1)(b) was therefore never open, and the notices issued beyond three years fell with it.

That is the headline, and it is a useful one. But the order takes up nine distinct grounds across nine assessment years. It decides five, renders four academic, and the assessee loses two of the five. The losses are at least as instructive as the win, because both turn on things that were, or were not, put on the record at the assessment stage.

Key points

• The fifty lakh in section 149(1)(b) is a jurisdictional fact. It is not settled by what the Assessing Officer asserts at the notice stage, and it does not stop being examinable once an assessment has been framed on a larger figure.
• For AYs 2014-15 to 2018-19 the notices under section 148 were quashed. The profit embedded in the alleged unaccounted purchases, running from Rs 1,36,461 to Rs 3,05,006, was the escaped income, and the fifty lakh condition was not met, although the assessed escapement for those years ran to more than Rs 27 crore.
• The Assessing Officer’s own reasoning supplied the answer. His order recorded that the assessee traded in mustard oil and that the oil purchased would correspondingly have been sold, which is why he assessed the profit as well.
• For AY 2022-23 the assessment was quashed as void because it was framed under section 143(3). Documents seized in a third party’s search attracted clause (iv) of Explanation 2 to section 148, and the section 148 route was the only route available.
• The cross-examination ground failed, because no specific request for cross-examination was shown to have been made. Chandra Mohan, decided by the same two members out of the same search, was expressly distinguished on that basis.
• The complaint that the notices gave thirty days rather than three months failed, because they were issued on 29 March 2023 and the three month requirement took effect on 1 April 2023.
• On the merits, only the profit element in unaccounted purchases is taxable. The Assessing Officer’s own rates of 0.44 to 0.31 per cent were sustained for the three surviving years.
• A long list of jurisdictional grounds was left undecided, including section 148B approval, section 151A and the faceless mechanism, section 127, and the certificate for electronic records. They revive if the Revenue succeeds on limitation.
• The central proposition is principled but not settled. The High Court authority behind it concerns gross receipts against capital gains, not purchases, and the step from one to the other has so far been taken only at Tribunal level.

What did ITAT Delhi decide in Ramesh Kumar?

Nine appeals by the Revenue and nine cross objections by the assessee, for assessment years 2014-15 to 2022-23, were heard together and disposed of by a common order of ITAT Delhi Bench “DB” (Satbeer Singh Godara, Judicial Member, and Naveen Chandra, Accountant Member) pronounced on 1 September 2026. They arose from a consolidated appellate order of the Commissioner of Income Tax (Appeals), Noida, dated 2 February 2026 under section 250(6), which in turn arose from assessments dated 26 February 2024 for AYs 2014-15 to 2020-21, 2 March 2024 for AY 2022-23 and 21 March 2024 for AY 2021-22. The order describes all of them as passed under section 147 and section 147 read with section 143(3), though its own reasoning on AY 2022-23 proceeds on the footing that that assessment was framed under section 143(3) alone.

The Revenue’s grounds were identical for every year: that the Commissioner (Appeals) had erred in deleting the addition on account of unaccounted purchases, and in deleting the application of section 69B to them. The Departmental Representative’s submission is recorded in a single line. He “vehemently relied on the orders of the AO”. No answer to any of the assessee’s legal grounds is recorded.

(One numbering point, since a reader will hit it on page 2. The order describes ITA No. 243/DDN/2026 as the lead appeal “for AY 2015-16”. On the sequence of the batch, and on the parallel recital that CO No. 6/DDN/2026 is the cross objection for AY 2015-16, ITA No. 243 should be the appeal for AY 2014-15. The figure quoted in the reproduced ground, Rs 6,22,80,023, is the AY 2015-16 figure, so the discrepancy lies in the appeal number rather than the year. Nothing turns on it, but anyone citing the paragraph should know.)

Because the assessee had taken a legal ground going to the validity of the assumption of jurisdiction under section 147, the Tribunal took up the cross objections first. That sequencing is itself worth noticing. It is the reason the Revenue’s appeals were, in the end, decided on a ground the Revenue had not chosen.

The outcome: the Revenue’s appeals were all dismissed; the cross objections for AYs 2014-15 to 2018-19 and for AY 2022-23 were allowed; and the cross objections for AYs 2019-20 to 2021-22 were dismissed.

What was the material, and where did it come from?

The assessee trades in mustard oil at Kotdwara, in the Pauri district of Uttarakhand, in the name of M/s Bal Mukund Ramesh Kumar.

On 2 June 2022 a search under section 132 was carried out on the Ravinder Oil Group. A laptop was recovered from the group’s premises. On it was a tally account, described in the order as the “Sanjeev tally”, in which two kinds of entry appeared: cash sales, and sales made through cheque. Only the cheque sales had been carried into the searched group’s own books of account. The assessee was one of the parties to whom the unrecorded cash sales were said to have been made.

On that footing the Assessing Officer issued notices under section 148 on 29 March 2023 for AYs 2014-15 to 2021-22. For AY 2022-23 he issued no notice under section 148 at all and framed the assessment under section 143(3). For every year he assessed the assessee on two parallel bases:

• the gross value of the alleged unaccounted purchases, added under section 69B; and
• separately, the profit said to be embedded in those purchases.

The figures across the nine years, as the Tribunal set them out, were these.

Assessment year	Unaccounted purchases added under s.69B	Profit separately added	Profit above Rs 50 lakh?
2014-15	3,68,81,488	1,36,461	No
2015-16	6,22,80,023	2,36,664	No
2016-17	6,48,95,020	3,05,006	No
2017-18	4,96,27,412	2,87,838	No
2018-19	5,79,52,937	2,54,992	No
2019-20	4,76,87,294	2,09,824	No
2020-21	3,77,36,909	1,62,268	No
2021-22	3,62,47,164	1,12,366	No
2022-23	1,45,36,561	39,248	No
Total	40,78,44,808	17,44,667

The five years in the first block are the ones reopened beyond three years, and the fourth column is the whole of the case on limitation.

The Commissioner (Appeals) deleted the addition of unaccounted purchases on the footing that they would have led to sales and that the Assessing Officer had already separately taxed the profit, and restricted the addition to the profit element. It was against that deletion that the Revenue appealed.

Why did the reopening fail for five of the nine years?

Section 149(1)(a) permits a notice under section 148 within three years from the end of the relevant assessment year. Section 149(1)(b), in the form applicable to a notice issued in March 2023, extends that period to ten years, but only on a condition. In the words of the statute, the Assessing Officer must have in his possession books of account or other documents or evidence which reveal that

the income chargeable to tax, represented in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.

One feature of that language carried the case: the subject of the measurement is “the income chargeable to tax”, not the value of the transaction from which it arises. A second, that the escaped income must be “represented in the form of” one of three things, the Tribunal did not reach. Its own recital of the provision at paragraph 9 omits that limb altogether.

The Tribunal’s reasoning on the first is short and rests entirely on the assessment order:

We find from the assessment order of the AO, that the AO himself has accepted the unaccounted purchases have resulted in corresponding sales and therefore has considered the profit embedded in the unaccounted purchases as well as the unaccounted purchases, as escaped income. We find from the above chart that the profit embedded in the unaccounted purchases, represents the “income escaping assessment”.

Since the profit for each of AYs 2014-15 to 2018-19 was below fifty lakh, the notices, being beyond three years, were “without jurisdiction” and were quashed.

The Tribunal followed Chandra Mohan v. ACIT, ITA Nos. 7 to 14/DDN/2026, which the order describes as a decision of ITAT Dehradun arising from the same search and concerning a similarly placed assessee. That order, of 24 July 2026, was made by the same two members who decided this case, and reached the same conclusion on the threshold. (Its own facts describe the searched group as Ravindra Oil and Ginning Mills; the order under note calls it the Ravinder Oil Group.)

It is worth being precise about what did the work here. It was not a general proposition that gross purchases can never be escaped income. It was the Assessing Officer’s own recorded finding, at paragraph 6.4 of his order, that the assessee was in the business of purchase and sale of mustard oil and that the oil purchased would correspondingly have been sold for profit. Having said that, he could not afterwards contend that the same purchases were an unexplained investment retained by the assessee. The Department was measured by its own case.

Is the fifty lakh tested at reopening, or on what finally stands?

This is the part of the decision with the widest reach, and it is worth separating carefully from the Tribunal’s own reasoning.

The Revenue’s instinct is that the threshold is fixed once and for all when the Assessing Officer forms his view, on the figure he then has in front of him. On that approach this reopening was unassailable. The Assessing Officer asserted an escapement of more than Rs 27 crore for the five years beyond three years, and he assessed it. No notice founded on Rs 27 crore looks vulnerable to a fifty lakh objection.

It was vulnerable, because the fifty lakh in section 149(1)(b) is not a matter of the Assessing Officer’s opinion. It is a jurisdictional fact. The section permits the notice only where the material in his possession reveals that the income chargeable to tax which has escaped assessment amounts to or is likely to amount to fifty lakh or more. Whether it does is an objective question, decided on the record, and an authority seized of that record can decide it whenever the point is taken. The Commissioner (Appeals) reduced the addition to the profit element. By the time the matter reached the Tribunal the escaped income, on the findings that stood, was between Rs 1.36 lakh and Rs 3.05 lakh a year. Measured against that, the gateway had never been open.

Two propositions should not be run together, because only one of them is the Tribunal’s.

What the Tribunal actually held is not that the appellate reduction retrospectively unmade the jurisdiction. It is that the escaped income always was the profit, because the Assessing Officer had himself accepted that the purchases produced corresponding sales. On that view nothing changed in appeal; the true position was simply established there. The assessee put it that way too, relying on the Commissioner (Appeals)’s restriction of the addition as “further fortifying” the position rather than as creating it.

What the case demonstrates in practice is the wider point, and it is the one worth carrying into other files. A fifty lakh objection is not spent because the assessment was framed on a larger figure. If the addition is cut down, on whatever ground, to a sum below the threshold, the foundation of the notice can be attacked on the record as it then stands.

The converse has already been decided, and it is decided the same way. In Rohit Kumar v. ITO, W.P.(C) 2830/2022, decided on 16 January 2025, the Delhi High Court held that the threshold must be satisfied when the proceedings are initiated, and that additions subsequently made in the course of reassessment which exceed fifty lakh cannot validate a reopening that was bad at inception. The figure at the end does not rescue a notice; and, as this case shows, the figure at the beginning does not save one either. Both follow from the same premise: the threshold answers to the income that actually escaped assessment, not to the number either side finds convenient.

The practical consequence is a sequencing point, and it is easy to get wrong. The fifty lakh ground often looks hopeless when the appeal is filed, because the assessed figure runs into crores. That is precisely when it must be taken, in the grounds and in Form 35, and kept alive. It becomes a winning ground only later, once the quantum argument has done its work, and a ground abandoned at filing is not available then. Where it was not taken at all, the route is an application for admission of additional grounds under section 250(5), a jurisdictional point being admissible on the existing record.

Which version of section 149 applied, and why does that matter?

A good deal in this area turns on which text you are reading, and the section has been rewritten twice in five years.

The version applied here is the one substituted by the Finance Act 2022 with effect from 1 April 2022, which governed a notice issued on 29 March 2023. It carries the three year and ten year periods and the tripartite “represented in the form of” formula quoted above.

The Finance (No. 2) Act 2024 substituted section 149 with effect from 1 September 2024. The outer periods became three years and three months, and five years and three months. More significantly for arguments of this kind, the new text drops “represented in the form of” and substitutes a looser formulation: books of account or other documents or evidence “related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more”.

The phrase “income chargeable to tax … which has escaped assessment” survives that redrafting, so the gross-against-net point made in this decision is not disturbed by it. What does not survive is the narrower “represented in the form of” requirement, which was the foundation of a separate and often decisive argument that book entries and bogus expenditure are not an “asset”. Anyone running that second argument has to check the date of the notice before running it at all. Our note on search and reassessment sets out the windows.

Is the “income, not turnover” reading supported by the High Courts?

On the general proposition, yes, and firmly.

In Nitin Nema v. PCIT (2023) 458 ITR 690 (Madhya Pradesh), decided on 16 August 2023, the figure relied on for the threshold was Rs 72,05,084, which was the gross sale consideration of sixteen scooters. The Court held that this was not income chargeable to tax, and quashed the notice. The Revenue’s special leave petition was dismissed: PCCIT v. Nitin Nema (2024) 468 ITR 105 (SC). It is the best authority for the proposition and, oddly, the Tribunal cited only the High Court decision, although Chandra Mohan had cited the Supreme Court order.

In Sanath Kumar Murali v. ITO (2023) 455 ITR 370 (Karnataka), the Court held that “income chargeable to tax” meant the capital gain computed under section 48, not the sale consideration of Rs 55,77,000, and that the indexed gain of Rs 33,85,000 fell below the threshold.

In Manjeet Kaur Duggal v. ITO (2025) 305 Taxman 305 (Delhi), decided on 29 May 2025, the net long term capital gain was Rs 42,97,299, and the Court held that gross sale consideration could not mechanically be treated as escaped income.

And in Rohit Kumar v. ITO, W.P.(C) 2830/2022 (Delhi), decided on 16 January 2025, the Court held that the threshold must be satisfied at the point of initiation, and that additions later made in the course of reassessment which exceed fifty lakh cannot validate a reopening that was bad when it began.

There is, however, a limit to how far that line can be pushed, and the honest position is this. Every one of those decisions is a receipts-against-gains case: sale consideration measured against capital gain, or a cash deposit, or the Assessing Officer’s own quantified figure. We have not been able to trace a High Court decision holding that, for unaccounted or bogus purchases, only the embedded profit counts towards the fifty lakh. The step taken in Ramesh Kumar, from “gross receipt is not income” to “gross unaccounted purchase is not income, only the margin is”, is an extension by analogy. It is a principled one, and on these facts it is very strong indeed because the Revenue’s own case conceded the measure. But it should be cited as the logic of Nitin Nema and Sanath Kumar Murali applied to purchases, not as settled High Court law on purchases.

Is there authority the other way?

There is a decision that pulls in a different direction, and it should be met rather than ignored.

In Molbio Diagnostics Ltd. v. ACIT, Writ Petition No. 142 of 2025, decided on 5 August 2025 by a Division Bench of the Bombay High Court at Goa (Bharati Dangre and Nivedita P. Mehta, JJ.), the reasons alleged bogus royalty expenditure of over Rs 1.50 crore. The Court declined to entertain, at the stage of the section 148 notice, the assessee’s contention that the income actually escaping assessment fell below fifty lakh. It held that although the threshold is a jurisdictional fact, the assessee’s rival quantification had to be established before the Assessing Officer in the reassessment proceedings on the strength of its ledgers and supporting material, and could not be accepted outright in writ jurisdiction.

Read carefully, that is a decision about the stage at which the threshold may be contested rather than a holding that the gross amount of a disputed deduction is itself the measure of escaped income. But it is the Revenue’s best answer, and the answer has real force in a writ petition. It has much less force before the Tribunal, where the assessment has already been made and the Assessing Officer’s own quantification is on the file. That distinction is worth taking deliberately: the threshold argument is usually stronger after the assessment order than before it, which is the opposite of the instinct most practitioners have.

There is also a structural answer available to the Department. Unaccounted purchases are, on the Department’s own case, unexplained expenditure or unexplained investment, on which the statutory charge falls on the whole amount and not on a margin. Where the corresponding sales are not accepted, the older line sustaining hundred per cent additions is available. The reason it was not available here is that the Assessing Officer had accepted the sales in terms.

Why was the assessment for 2022-23 quashed?

For AY 2022-23 the Assessing Officer did not issue a notice under section 148 at all. He framed the assessment under section 143(3).

Explanation 2 to section 148 deems the Assessing Officer to have information suggesting that income has escaped assessment in four situations. Clause (iv) covers the case where the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any books of account or documents seized or requisitioned under section 132 or section 132A in the case of any other person on or after 1 April 2021 pertain to, or any information contained in which relates to, the assessee. That is precisely this case: documents seized from the Ravinder Oil Group in June 2022, said to pertain to Ramesh Kumar.

The Tribunal held that the Assessing Officer was required to proceed under section 148 and to pass an order under section 147 read with section 144B, and that an assessment framed directly under section 143(3) without that notice was void ab initio. (Paragraph 19 of the order goes on to describe this as a quashing of “the notice u/s 148” for AY 2022-23. There was no such notice, which was the whole point; what was quashed was the assessment.) It followed Montage Enterprises Pvt. Ltd. (ITA No. 5458/Del/2025, ITAT Delhi, 29 December 2025), where the same conclusion was reached on an AY 2022-23 assessment.

There is a stronger way to put the same point, and it is worth having in reserve. Explanation 2 is a deeming provision about information. It does not in terms prescribe which machinery must be used. The reason the section 147 and 148 route was the only route here is simpler and purely textual: section 153A was confined by the Finance Act 2021 to searches initiated on or before 31 March 2021, section 153C is tied to the same sunset, and block assessment under Chapter XIV-B was not restored until 1 September 2024. For a third party search initiated on 2 June 2022 there was no other door. See our notes on section 153A and the block assessment scheme.

Does the section 148B approval prove anything?

The assessee argued that the approval taken from the Additional Commissioner under section 148B was mechanical, and separately that seeking any approval at all while framing an order under section 143(3) was itself an illegality, since no approval is contemplated for such an order. Reliance was placed on Chemical Agencies v. ACIT (ITA No. 7092/Del/2025) and Vimal Kumar v. DCIT (ITA No. 4830/Del/2026, 12 August 2026).

The Tribunal did not decide either limb. It quashed on the Explanation 2 route and went no further.

The point is nonetheless worth understanding, because it is often put too high. Section 148B provides that no order of assessment, reassessment or recomputation shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i), (ii), (iii) or (iv) of Explanation 2 to section 148 applies, except with the prior approval of the Additional Commissioner, Additional Director, Joint Commissioner or Joint Director. It was inserted by the Finance Act 2022 with effect from 1 April 2022.

So an approval on the file shows that the Department itself proceeded on the footing that one of the four clauses of Explanation 2 applied. That is a useful admission, and it sits awkwardly beside an assessment framed under section 143(3). But it is corroboration, not proof. It does not identify which of the four clauses was thought to apply; it bites only where the officer is below the rank of Joint Commissioner, so its absence proves nothing where a Joint Commissioner framed the order; and an approval taken out of caution does not create a jurisdictional fact. Use it as the Revenue’s own contemporaneous position, and let the statutory sunset in section 153A do the load-bearing work.

How settled is the section 143(3) point?

Less settled than the volume of Tribunal decisions suggests.

The Tribunal line is now substantial: Montage Enterprises, Pradeep Kumar Agrawalla (ITA Nos. 6158 and 6959/Del/2025, 28 April 2026; the order under note spells the name Agarwalla), Mirha Exports Pvt. Ltd., and this decision, among others. (Chemical Agencies and Vimal Kumar, also cited to the Tribunal, are authority on the related approval point rather than on this one.)

Against it stands a High Court decision that does not appear to have been cited. In Zigma Global Environ Solutions (P.) Ltd. v. Union of India, W.P. Nos. 50601 and 25340 of 2025, C. Saravanan J. of the Madras High Court, by judgment dated 13 July 2026 and confirmed on clarification on 27 July 2026, dismissed writ petitions in a case concerning AY 2023-24 where a search under section 132 had been conducted in April 2024 and the assessment was framed under section 143(3) without any notice under section 148. The Court held that where the period for issuing an intimation under section 143(1) or for passing a scrutiny assessment under section 143(3) has not expired under section 153, the return is to be processed or assessed under those provisions; and that a notice under section 148 is called for where that period has already expired, in which event, a search having taken place, such notice issues without the procedure in section 148A(a) to (d).

That is a reasoned distinction rather than a flat contradiction, since it turns on the section 153 window for the year in question still being open. But it is a High Court speaking on the same question, and it goes the other way. It is available on Indian Kanoon and has been noticed by one publisher; we have not been able to trace it in the standard reports. Anyone presenting the Tribunal line as settled should expect to meet it.

Why did the cross-examination ground fail?

This is the part of the order most worth reading twice, because it cost the assessee nothing here only by accident of the limitation win.

The assessee’s case was that the additions rested on third party digital data, that the Assessing Officer had relied on the Sanjeev tally extensively and adversely, and that no opportunity to cross-examine the person from whom the material was retrieved had been given, despite a request said to have been made by letter dated 10 February 2024.

The Tribunal rejected it on a pure question of record:

From the perusal of the assessment order and the CIT(A) order, we find that nowhere the assessee had made any specific request for cross examination from Ravinder Oil Group.

That finding is hard to reconcile with what the order itself records. The assessee had pointed to a letter dated 10 February 2024 written to the Assessing Officer, and to pages 15 and 21 of the paper book, where the Commissioner (Appeals) had reproduced a written submission expressly asking that an opportunity of cross-examination be given. A finding that the request appears “nowhere” in the assessment order or the appellate order, recorded against specific page references to the appellate order, is the kind of finding an assessee would be entitled to take up by way of a miscellaneous application under section 254(2).

Chandra Mohan was expressly distinguished. There, the Tribunal noted, the assessee had specifically questioned the appearance of his name in the seized material and had been denied cross-examination to ascertain it, despite a specific request. Here the assessee “never made any such case for cross examination nor it presented any evidence to show that it made specific request for cross examination during the assessment proceedings”.

Two members, one search, two assessees, opposite results on the same ground, six weeks apart. The difference is not doctrinal. Andaman Timber Industries v. CCE (Supreme Court, Civil Appeal No. 4228 of 2006, 2 September 2015) remains what it always was, and the Tribunal did not doubt it. The difference is that in one file the request was on the record and in the other it was not.

The practical conclusions are unglamorous and they are the whole of the point. Ask in writing. Ask during the assessment proceedings, not in appeal. Identify the person to be cross-examined by name, and say what you would put to them: that your name does not appear in the seized data, or appears in a form you dispute. Record the non-response. And make sure the request and the non-response are reproduced in the statement of facts, because a Tribunal reads the assessment order and the appellate order, and if the letter is not visible there it may as well not exist.

Was the thirty-day period in the notice an illegality?

No, and the reason is a date.

The assessee argued that every notice gave only thirty days to file the return against a statutory mandate of three months, relying on DCIT, Raipur v. Anand Kumar Agarwal (ITA No. 707/RPR/2025, 5 August 2026), which in turn relied on CIT v. Ramsukh Motilal (Bombay High Court, 24 September 1954, AIR 1955 Bom 227), where a notice under section 34 of the 1922 Act giving six days instead of the statutory thirty was held to be no notice at all, the requirement being a condition precedent to the assumption of jurisdiction and not a procedural irregularity capable of waiver.

The Tribunal set out section 148 as it stood before 1 April 2023, under which the Assessing Officer was to serve a notice requiring the assessee to furnish a return “in such period, as may be specified in such notice”. The period was at the Assessing Officer’s discretion, and no minimum was prescribed. The three month requirement was introduced by the Finance Act 2023 with effect from 1 April 2023. The notices here were issued on 29 March 2023. The ground was rejected.

It is worth spelling out the arithmetic in Anand Kumar Agarwal, because the passage quoted in this order is compressed to the point of obscurity. The notice there was dated 28 March 2024, after the amendment. Three months from the end of the month in which it was issued expired on 30 June 2024. The ninety days the Assessing Officer allowed ran out on 26 June 2024. The notice was therefore four days short of the statutory period, and the reassessment was quashed.

Three days separate a good ground from a bad one. That is not a criticism of either decision; it is what a commencement date does.

What survived on the merits?

For AYs 2019-20 to 2021-22 the notices stood, and the Revenue’s appeal against the deletion of the gross addition had to be decided.

The Tribunal agreed with the Commissioner (Appeals). Both the Assessing Officer and the Commissioner (Appeals) had accepted that unaccounted purchases must be countenanced with corresponding sales. Following PCIT v. Nandkishor Hulaschand Jalan [2024] 161 taxmann.com 80 (Gujarat) and PCIT v. Max Flex and Imaging Systems Ltd. [2024] 161 taxmann.com 775 (Bombay), the citations the order itself gives, it held that “the entire unaccounted purchase cannot be added and only the profit embedded in the unaccounted purchase is liable to be taxed”, and sustained the profit determined by the Assessing Officer, at rates ranging from 0.44 to 0.31 per cent of the unaccounted purchases.

On the authorities, two clarifications are worth making. In Nandkishor Hulaschand Jalan the Gujarat High Court restricted an addition on unverifiable sundry creditors to 25 per cent, following Vijay Proteins Ltd. and distinguishing N.K. Industries; the Revenue’s special leave petition was dismissed by the Supreme Court on 1 February 2024 in a non-speaking order, which on Kunhayammed v. State of Kerala does not operate as an affirmance of the High Court’s reasoning. (The Gujarat decision is reported at (2019) 412 ITR 357 and re-reported at the taxmann citation the order gives; the order spells the name “Huaschand” in one place and “Hulaschand” in another, following the reports, which differ.) In Max Flex and Imaging Systems the Bombay High Court held on 3 April 2024 that only the profit element can be treated as income, “particularly, when the sales has not been disputed”, and restricted the addition to 12.5 per cent.

The rates sustained here, between a third and a half of one per cent, are not a benchmark for anything. They are the margins of a mustard oil trading business as the Assessing Officer himself computed them, and they sit far below the 12.5 per cent in Max Flex, the 25 per cent in Nandkishor, and the 1 per cent applied in Chandra Mohan out of the very same search. Where an estimate is in issue, the rate is a question of fact on that record and nothing else.

The assessee’s own cross objection went further and contended that since it had not undertaken the transactions at all, no income arose. The Tribunal never addressed that contention anywhere in its reasoning; it falls only with the operative order dismissing the cross objections for those three years. In fairness, having accepted the profit-only measure for the purpose of the limitation argument, the assessee was always going to find it difficult to contend simultaneously that there was no profit at all.

Which grounds were not decided?

A long list, and a practitioner should know what is still live.

• The fourth proviso to section 153A(1), and the absence of income represented in the form of an “asset”, for AYs 2014-15 to 2016-17. Rendered academic.
• Whether the Sanjeev tally data constituted “an entry or entries in the books of account” within section 149(1)(b)(iii). Rendered academic. This is a substantial point and it is the limb on which several decisions have quashed reopenings even where the fifty lakh was exceeded.
• Whether the addition could be made under section 69B at all, and whether the excel sheet had any evidentiary value. Recorded as academic for the quashed years. For the surviving years the Tribunal said in terms that the issue “shall be discussed while dealing with assessment made for AY 2019-20 to AY 2021-22 later in the order”, and then never returned to it. That is not a neutral silence. It is an undertaking left unperformed on the face of the order, which is the ordinary foundation for an application under section 254(2).
• That the additions rest on third party material and dumb documents, unsupported by corroborative evidence and resting on surmises and conjectures.
• That section 69B was invoked read with section 115BBE, which has no application on these facts. On the three surviving years this is a live and valuable point: the special rate is sixty per cent plus surcharge, with no deduction for expenditure or allowance and no set-off of loss. See our note on section 115BBE.
• That every document called for was filed, that no defect or infirmity was ever identified in them, and that the books of account were never rejected. An estimated addition standing on unrejected books is vulnerable on that ground alone.
• That the preconditions in section 151, as well as those in sections 147 and 149, were not satisfied.
• Mechanical approval under section 148B, and the legality of taking an approval for an order under section 143(3).
• Issue of the notice without recording reasons and without incriminating material.
• Issue of the notice by the Jurisdictional Assessing Officer contrary to section 151A read with Notification No. 18/2022, S.O. 1466(E), dated 29 March 2022.
• Absence of a valid order under section 127, the notice having been issued by the Income Tax Officer, Kotdwar and the order passed at Central Circle, Dehradun. (The order is itself inconsistent about who passed it, describing the officer as the Deputy Commissioner at paragraph 1 and reproducing the assessee’s description of him as the Assistant Commissioner in the ground. The discrepancy is unresolved on the face of the order and it bears both on the section 127 ground and on the rank condition in section 148B.)
• The absence of a certificate under section 65B of the Evidence Act for the digital data.

None of these is lost. If the Revenue carries the limitation question to the High Court and succeeds, they revive. The assessee who wins on one jurisdictional ground and has most of the twelve grounds in the cross objections recorded but undecided is in a better position than the one who won on the merits alone.

On the section 65B point in particular, a caution. The Madras High Court has held that section 65B of the Evidence Act, and section 63 of the Bharatiya Sakshya Adhiniyam, 2023 which replaced it from 1 July 2024, do not apply to income tax assessment proceedings, which are quasi-judicial and not governed by the strict rules of evidence. The argument is better pitched as going to the reliability and provenance of the electronic record than as a rule of inadmissibility, and it is strongest when run alongside the cross-examination and unreliable-material grounds rather than instead of them.

What is the position on faceless notices now?

The section 151A ground raised in the cross objections was not decided, but it is the most volatile question in reassessment at the moment and it moved twice in the fortnight after this order.

The Bombay High Court in Hexaware Technologies Ltd. v. ACIT [2024] 464 ITR 430 held that a notice under section 148 must issue through automated allocation in a faceless manner under section 151A read with the Scheme notified on 29 March 2022, and that there is no concurrent jurisdiction between the Jurisdictional Assessing Officer and the faceless mechanism.

The Finance Act 2026 (Act No. 4 of 2026) then inserted section 147A, and provided that it “shall be deemed to have been inserted with effect from the 1st day of April, 2021”. It reads:

Notwithstanding anything contained in any judgment, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.

On 10 September 2026 a Division Bench of the Punjab and Haryana High Court (Deepak Sibal and Rupinderjit Chahal, JJ.) in Jyoti Sareen v. Union of India, CWP No. 15791-2024 and some six hundred connected petitions, struck section 147A down as unconstitutional and quashed the notices issued outside the faceless mechanism, on the reasoning that the legislature had sought to displace the judgments of constitutional courts by declaration while leaving section 151A and the Scheme untouched, and had therefore not cured the defect the courts had identified.

On 18 September 2026 the Supreme Court stayed that judgment, subject to the condition that assessment and reassessment proceedings shall not proceed further until final disposal, and listed the matter for hearing in December 2026.

Separately, in Income Tax Officer v. ATC Exports, Writ Appeal No. 266 of 2026 (T-IT), decided on 26 June 2026, the Karnataka High Court set aside a Single Judge’s order quashing a Jurisdictional Assessing Officer’s notice and remanded the matter in the light of section 147A, expressly leaving open the challenge to that section’s validity and retrospectivity. It did not decide the constitutional question.

The law on this question is stated as on 19 September 2026. It will not stay that way, and any submission running the point needs the position checked on the day it is filed.

What does this mean for a file today?

Six things, in the order they arise.

Read the assessment order for concessions before reading it for errors. The whole of this case is an Assessing Officer’s own paragraph 6.4. Where an officer explains why he is making an alternative or additional addition, he is usually explaining the limits of his primary one. Those sentences are worth more than the ones you disagree with.

Compute the threshold on income, and do it on the Department’s own figures. Where a notice issues beyond three years, put the arithmetic in a table, year by year, using the Assessing Officer’s own quantification of profit rather than your own. A table the Department cannot dispute is a better ground than an argument it can.

Check the date of the notice against every commencement date. Three days decided the thirty-day ground here. The same discipline applies to the section 149 text, to the section 148 return period, and to whether section 148A applied at all.

Ask for cross-examination in writing, during the assessment. Name the person, say what you would put to them, and get the request onto the assessment record. Then reproduce it in the statement of facts. A ground that depends on a request the Tribunal cannot see is not a ground.

Take the jurisdictional points even when you expect to win on one of them. Most of the twelve grounds taken in the cross objections here were recorded and left undecided, and they are available on a remand precisely because they were taken. Our note on section 148A sets out what a reassessment has to contain to survive on its own footing.

Do not over-read the result. The rate sustained was a third of one per cent, on a record where the Assessing Officer had accepted the sales. On a different record, with no accepted sales and no alternative profit addition, neither the limitation point nor the profit-only measure would have been available.

Which regime governs a search today?

Not this one, and the distinction matters because material from a search is still the most common origin of an addition of this kind.

Searches initiated up to 31 March 2021 are assessed under sections 153A and 153C. Searches initiated between 1 April 2021 and 31 August 2024, which is the window this case falls in, were brought into the reassessment machinery of sections 147 and 148, with Explanation 2 supplying the deemed information. Searches initiated on or after 1 September 2024 fall under the block assessment scheme reintroduced in Chapter XIV-B by the Finance (No. 2) Act 2024, and Explanation 2 to section 148 was omitted with effect from that date. For searches initiated on or after 1 April 2026 the corresponding provisions are sections 292 to 301 of the Income-tax Act, 2025.

The date the search was initiated, not the year assessed and not the date of the order, decides which of these applies. We set the windows out, with the limitation periods for each, in After an income tax search: from the panchnama to the block notice, and the related question of what a search-origin reassessment must contain is discussed in On-money additions: what a seized cash book can and cannot prove.

JCIT (OSD), Central Circle Dehradun v. Ramesh Kumar (M/s Bal Mukund Ramesh Kumar), ITA Nos. 243 to 251/DDN/2026 with CO Nos. 5 to 13/DDN/2026, assessment years 2014-15 to 2022-23, Income Tax Appellate Tribunal, Delhi Bench “DB”, heard 20 August 2026 and pronounced 1 September 2026 by Shri Satbeer Singh Godara, Judicial Member, and Shri Naveen Chandra, Accountant Member. Ms. Ananya Kapoor, Ms. Sakshi Rustagi and Shri Adit Taneja, Advocates, for the assessee; Shri Mohan Lal Joshi, Senior Departmental Representative, for the Revenue. Read in September 2026; the law on section 147A and faceless notices is stated as on 19 September 2026. See also the site’s pages on search and reassessment, section 148A, section 153A, the block assessment scheme and section 115BBE. Statutory text: section 148, section 148A, section 149, section 153A, section 132, section 131. Judgments: Chandra Mohan v. ACIT, ITA Nos. 7 to 14/DDN/2026 (ITAT), 24 July 2026; Montage Enterprises Pvt. Ltd. v. DCIT, ITA No. 5458/Del/2025 (ITAT Delhi), 29 December 2025; Pradeep Kumar Agrawalla, ITA Nos. 6158 and 6959/Del/2025 (ITAT Delhi), 28 April 2026; Vimal Kumar v. DCIT, ITA No. 4830/Del/2026 (ITAT Delhi), 12 August 2026; Chemical Agencies v. ACIT, ITA No. 7092/Del/2025 (ITAT Delhi); DCIT, Raipur v. Anand Kumar Agarwal, ITA No. 707/RPR/2025; CIT v. Ramsukh Motilal (Bombay), 24 September 1954, AIR 1955 Bom 227; Nitin Nema v. PCIT (2023) 458 ITR 690 (Madhya Pradesh), SLP dismissed, PCCIT v. Nitin Nema (2024) 468 ITR 105 (SC); Sanath Kumar Murali v. ITO (2023) 455 ITR 370 (Karnataka); Manjeet Kaur Duggal v. ITO (2025) 305 Taxman 305 (Delhi), 29 May 2025; Rohit Kumar v. ITO, W.P.(C) 2830/2022 (Delhi), 16 January 2025; Molbio Diagnostics Ltd. v. ACIT, W.P. No. 142 of 2025 (Bombay at Goa), 5 August 2025; Zigma Global Environ Solutions (P.) Ltd. v. Union of India, W.P. Nos. 50601 and 25340 of 2025 (Madras), 13 July 2026, confirmed on clarification 27 July 2026; PCIT v. Nandkishor Hulaschand Jalan (Gujarat) (2019) 412 ITR 357, SLP dismissed 1 February 2024, (2024) 461 ITR 338 (SC); PCIT v. Max Flex and Imaging Systems Ltd. (Bombay), 3 April 2024; Andaman Timber Industries v. CCE (SC), Civil Appeal No. 4228 of 2006, 2 September 2015; CIT v. Ashwani Gupta, ITA 1264/2008 (Delhi), 16 February 2010; Hexaware Technologies Ltd. v. ACIT [2024] 464 ITR 430 (Bombay); Jyoti Sareen v. Union of India, CWP No. 15791-2024 (Punjab and Haryana), 10 September 2026, stayed by the Supreme Court on 18 September 2026; Income Tax Officer v. ATC Exports, Writ Appeal No. 266 of 2026 (T-IT) (Karnataka), 26 June 2026; Kunhayammed v. State of Kerala (2000) 245 ITR 360 (SC). Read the order (PDF, 18 pages).

This note is general commentary on the law as at 19 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.