Principal Commissioner Of Income Tax-10, Delhi vs Pramod Gupta

Court
Delhi High Court

$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 28.10.2026
# CNR No. DLHC010278102026
+ ITA 490/2026 & CM APPL. 41043/2026, CM APPL.
41044/2026
PRINCIPAL COMMISSIONER OF INCOME TAX-10,
DELHI .....Appellant
Through: Mr.Abhishek maratha,SSC, Mr.
Apporv Agarwal,JSC,Adv.
Bhanukaran singh, Adv. Alok
Shukla.

versus

PRAMOD GUPTA .....Respondent
Through: Mr. S. Krishnan, Advocate

CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
HON'BLE MS. JUSTICE RENU BHATNAGAR
JUDGMENT (ORAL)
1. The instant appeal has been filed under Section 260A of
Income-Tax Act, 1961 (“the Act”), against the Order dated 30.09.2025
(“Impugned Order”) passed by the Income Tax Appellate Tribunal,
Bench „F‟, Delhi (“ITAT”) in ITA No. 3648/DEL/2019 for
Assessment Year 2010-11.
2. The instant appeal raises the following question of law.
a. Whether on the facts and in the circumstances of the case, were
the proceedings initiated under Section 147/148 of the Act
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SINGH NEGI
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without there being any valid reason to believe that the income
chargeable to tax had escaped assessment.
3. Shorn of unnecessary details, the relevant facts are as follows:
a. A search and seizure operation was carried out by the
department on 18.11.2015 in the premises of Shri Pradeep
Kumar Jindal at H-1/1A, Model Town, New Delhi.
b. Documents were seized which disclosed that Shri Pradeep
Kumar Jindal was involved in providing accommodation entries
in the form of share capital/premiums, or to issue loans and
advances etc. in lieu of cash received from the beneficiaries
through front/non-listed companies managed and controlled by
him with the help of dummy directors.
c. From the documents found during the investigation allegedly
revealed that various companies had provided accommodation
entries to the assessee herein.
d. On the basis of the said information, notice under Section 148
of the Act was issued by the appellant to the assessee for the
AY 2010-11 and subsequently, an assessment order was passed
under Section 147 of the Act.
e. On the basis of the assessment order, the Assessing Officer held
that the assessee had taken accommodation entries of Rs.
58,87,000/- which were not genuine transaction.
f. The assessee‟s challenge to the said order was rejected by the
Commissioner of Income Tax (Appeals)-16 (“CIT(A)”) vide
Order dated 11.02.2019 which was further challenged by the
assessee before the ITAT in ITA No. 3648/DEL/2019.
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g. The ground taken by the assessee before the learned ITAT was
that in proceedings under Section 147/148 of the Act was not
proper in as much as there was no reason to believe for the
Assessing Officer to issue notice under Section 148 of the Act.
h. The learned ITAT held that the Assessing Officer has only
borrowed the satisfaction from the information of the
Investigation Wing and did not make any attempt to corroborate
or correlate the information by independent application of mind.

i. The ITAT set aside the assessment order dated 28.12.2017,
giving rise to the present appeal by the Revenue.
4. The short question is, therefore, arises for consideration is
whether the proceedings were initiated in accordance with law or not
or whether the department proceeded merely on the basis of
information received from the Investigation Wing.
5. Learned counsel appearing for the appellant-Revenue states that
during the search operation and post search proceedings, statements of
several persons were recorded on oath who admitted they were
knowing the directors of the front companies and Shri Pradeep Kumar
Jindal whose premises were search was managing all the front
companies and Shri Pradeep Kumar Jindal was providing
accommodation entries to various beneficiaries, including the assessee
herein.
6. The CIT(A) is also held that there was failure on the part of the
assessee to disclose fully and truly all material facts and only on the
basis of the material collected during the search and post search
proceedings, the Assessing Officer arrived at a prima facie belief that
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income has escaped assessment.
7. The learned ITAT came to the conclusion that the Assessing
Officer only borrowed satisfaction from the information of the
Investigation Wing and did not make any attempt to corroborate or
correlate the information by independent application of mind.
8. The perusal of the order of the Assessing Officer and the
CIT(A) states the contrary.
9. The finding of the learned ITAT that the satisfaction is merely a
borrowed satisfaction from the information of the Investigation Wing
alone is not correct narration and understanding of the facts.
10. The form of recording the reason to belief states that the
information received from the Investigation Wing that the assessee has
taken accommodation entry of Rs. 5,00,000 from M/s Parsandi
Leasing & Finance Private Limited in its own name and
accommodation entry of Rs. 5,27,000/- in the name of M/s P.L. Gupta
& Sons and, therefore, there is reason to belief that sum of Rs.
10,27,000/- is chargeable to tax as escaped assessment.
11. The perusal of the assessment order also indicates that during
the search operation and post search proceedings, statements of Smt.
Meera Mishra, Shri Laxman Satyapal, Shri Subodh Khandelwal, Smt.
Seema Khandelwal, Smt. Renu Jindal, Shri Ajay Kumar Jindal and
Shri Uttam Kumar Shrivastva were recorded on oath who have
admitted to the fact that they were only namesake directors of the
front companies of Shri Pradeep Kumar Jindal.
12. Learned counsel for the assessee states that, whereas the form
of reason to believe only states that income of Rs. 10,27,000/- has
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escaped assessment whereas under the order, the Assessing Officer
ultimately made an addition of Rs. 58,87,000/- on account of alleged
accommodation entries.
13. In the opinion of this Court, the form of reason to belief, the
Assessing Officer has given valid justification as to how income has
escaped assessment. During the search proceedings, undoubtedly, the
figure has increased but that does not mean that there was virtually no
exercise done by the Assessing Officer before issuing notice under
Section 148 of the Act.
14. The assessment order reveals that statements were taken during
search proceeding and, therefore, there was material available with the
authority at the time of issuing notice under Section 148 of the Act.
15. In ITO v. Lakhmani Mewal Das , (1976) 103 ITR 437 (SC), the
Hon‟ble Supreme Court held that the expression “reason to believe”
does not contemplate a purely subjective satisfaction on the part of the
Assessing Officer. The reasons recorded must have a rational
connection with, or a relevant bearing on, the formation of the belief
that income chargeable to tax has escaped assessment. The existence
of such a belief is open to judicial scrutiny, although the sufficiency of
the material forming the basis of the belief is not ordinarily a matter
for the Court to examine. The Court further observed that the reasons
must be bona fide and cannot be a mere pretence. The relevant extract
of the judgment is reproduced hereinbelow:
“8. The grounds or reasons which lead to the formation of
the belief contemplated by Section 147(2) of the Act must
have a material bearing on the question of escapement of
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income of the assessee from assessment because of his
failure or omission to disclose fully and truly all material
facts. Once there exist reasonable grounds for the Income-
tax Officer to form the above belief, that would be sufficient
to clothe him with jurisdiction to issue notice. Whether the
grounds are adequate or not is not a matter for the court to
investigate. The sufficiency of grounds which induce the
Income-tax Officer to act is, therefore, not a justiciable
issue. It is, of course, open to the assessee to contend that
the Income-tax Officer did not hold the belief that there had
been such non-disclosure. The existence of the belief can be
challenged by the assessee but not the sufficiency of
reasons for the belief. The expression “reason to believe”
does not mean a purely subjective satisfaction on the part
of the Income-tax Officer. The reason must be held in good
faith. It cannot be merely a pretence. It is open to the court
to examine whether the reasons for the formation of the
belief have a rational connection with or a relevant bearing
on the formation of the belief and are not extraneous or
irrelevant for the purpose of the section. To this limited
extent, the action of the Income-tax Officer in starting
proceedings in respect of income escaping assessment is
open to challenge in a court of law”
16. It is well-settled that exercise of power under Section 148 of the
Act contemplates that:
a. There must be relevant material on the basis of which the belief
is formed.
b. Circumstances must exist and cannot be deemed to exist at the
time of arriving on an opinion.
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c. And the reason to believe must be honest and not based on
suspicion, gossip, rumor or conjecture.
d. Reasons referred to must disclose the process of reasoning by
the Assessing Officer by which the Assessing Officer holds that
reason to believe and that the it not a mere rule to reassess.
e. That there is nexus between materials in belief.
f. Reasons recorded must show application of mind by the
Assessing Officer.

17. In the facts of the present case, all the conditions are satisfied.
18. A perusal of the assessment order and the reason to believe
indicates that search and seizure was conducted on the premises of
Shri Pradeep Kumar Jindal and statements were recorded at the time
of search and before notices were issued, the accommodation entries
were provided.
19. The mere fact that the assessment order confirms the amount
which has been added as income is more than the amount mentioned
in the form of reason to believe that cannot on its own leads to a
conclusion that without there is any independent application of mind
by the Assessing Officer only on the basis of the information received
from the Investigation Wing, proceedings were initiated.
20. However, in order to enable the assessee to establish that the
assessment order was not correct on the facts, an option has to be
given to the assessee to establish before the learned ITAT.
21. The question is answered in favour of the revenue.
22. The impugned order of the learned ITAT is set-aside.
23. Accordingly, the matter is remanded back to the learned ITAT
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to determine on the facts as to the amount of income that is escaped
assessment.
24. With aforesaid direction, the present appeal with pending
applications stands disposed of.


SUBRAMONIUM PRASAD, J

RENU BHATNAGAR, J
OCTOBER 28, 2026 /bs/ns

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SINGH NEGI
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