Varada Mercantile Pvt. Ltd. vs. PCIT

Parties Involved

Facts Summary

The assessee, Varada Mercantile Pvt. Ltd., filed returns of income for the assessment years 2016-17 and 2017-18 declaring Nil income after reporting current-year losses. Actionable information was received through the Insight Portal pursuant to a search and seizure action conducted under section 132 in the case of the One World Group. The information referred to the statement of Shri Rajesh G. Mehta recorded on 08.11.2019 and alleged that M/s. Aneri Fincap Limited, formerly known as M/s. Farry Industries Limited, was engaged in providing accommodation entries. On this basis, the assessments for both years were reopened in respect of the loans received by the assessee from the said concern. The Assessing Officer issued notices under sections 143(2) and 142(1) and accepted the returned income after examining the material furnished by the assessee. The Principal Commissioner of Income-tax initiated revisionary proceedings under section 263 by issuing show-cause notices dated 10.03.2026, holding that the reassessment orders were erroneous and prejudicial to the interests of the Revenue. The assessee appealed against these orders, contending that the reassessment orders were void ab initio due to the jurisdictional defect in obtaining approval under section 151 of the Income-tax Act.…

Legal Issues

• 1. Whether the assessee is entitled to question the jurisdictional competence of the foundational reassessment proceedings in appeals directed against the orders under section 263.
• 2. Whether the reassessment orders could constitute legally sustainable orders capable of revision under section 263.

Judgment Outcome

Decided in favour of Assessee.

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