ITAT Mumbai Invalidates Search-Triggered Reassessment Due to Defective Section 148 Approval: Shraddha Prakash Mehta Vs ITO

Overview of the Dispute

The Income Tax Appellate Tribunal, Mumbai Bench, delivered a significant ruling in Shraddha Prakash Mehta Vs ITO (ITAT Mumbai) concerning Assessment Year 2019-20, where reassessment proceedings initiated under Section 147 read with Section 148 of the Income Tax Act, 1961 were challenged on foundational jurisdictional grounds. The Tribunal ultimately ruled in favour of the assessee and quashed both the notice and the consequential assessment order, holding that a critical statutory approval was missing at the appropriate procedural stage.

Background and Factual Matrix

Origin of the Reassessment

The chain of events leading to this dispute began with a search action carried out on 05/07/2022 in the case of Suumaya Group. Following this search, the office of the Joint Commissioner of Income Tax (OSD), Central Circle-4(4), Mumbai, forwarded information to the Assessing Officer indicating that the assessee's proprietary concern, M/s. Shraddha Cottworld, had allegedly engaged in circular trading transactions with the Suumaya Group.

On the basis of this intelligence, the Revenue contended that purchases aggregating to Rs. 1,27,57,013/- recorded by M/s. Shraddha Cottworld from the Suumaya Group were non-genuine accommodation entries devoid of actual delivery of goods.

Initiation of Reassessment Proceedings

Acting on the above-mentioned information, the Assessing Officer initiated proceedings under Section 148A and subsequently issued a notice under Section 148 dated 29/03/2023. After completing the reassessment process, the Assessing Officer treated the disputed purchases of Rs. 1,27,57,013/- as unexplained expenditure and brought them to tax under Section 69C of the Income Tax Act, 1961. The consequential assessment order was passed on 22/12/2023 under Section 147 read with Section 144B.

Proceedings Before the First Appellate Authority

The assessee challenged the Assessing Officer's order before the National Faceless Appeal Centre (NFAC), Delhi. The learned CIT(A), however, upheld the Assessing Officer's action in its entirety. Notably, the assessee had filed written submissions on 06th October, 2025, which were alleged to have not been considered by the CIT(A) before disposing of the appeal — forming one of the grounds before the Tribunal.

Grounds Raised Before ITAT

The assessee raised a comprehensive set of grounds before the Tribunal spanning both jurisdictional and merits-based challenges, including: