Dhansamridhi Finance Pvt. Ltd. Vs ACIT: A Critical Analysis of Jurisdictional Defects in Reassessment

In a pivotal ruling concerning the validity of reassessment proceedings, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has reinforced the strict adherence required for statutory timelines and administrative approvals. The Tribunal, in the case of Dhansamridhi Finance Pvt. Ltd. Vs ACIT, declared the assessment order void ab initio. The decision was grounded on two primary jurisdictional failures: the issuance of a notice under Section 148 prior to obtaining mandatory sanction under Section 151, and the mechanical nature of the approval granted by the Principal Commissioner of Income Tax (PCIT).

Case Background and Core Dispute

The appeal was filed by the assessee challenging the order passed by the National Faceless Appeal Centre (NFAC) for the Assessment Year (AY) 2011-12. The central issue revolved around an addition of ₹22,37,61,000 made under Section 68 of the Income Tax Act 1961, pertaining to unexplained cash credits.

While the assessee initially contested the additions on their merits—arguing that the identity, genuineness, and creditworthiness of the creditor parties were established—the primary defense shifted to fundamental legal grounds. The assessee introduced additional grounds of appeal questioning the very jurisdiction of the Assessing Officer (AO) to frame the assessment.

The specific legal challenges raised were:

  1. Timing of Approval: The mandatory sanction under Section 151 was obtained after the issuance of the notice under Section 148.
  2. Non-Application of Mind: The sanction granted by the PCIT was mechanical, evidenced by the lack of recorded satisfaction.