Introduction
In a significant consolidated ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, disposed of 15 appeals—ten by the assessee, Mirha Exports Pvt. Ltd., and five by the Revenue—arising from reassessment proceedings initiated post a search conducted on 21 January 2023 (Assessment Year 2022–23). The judgment, pronounced on 22 May 2026, addresses critical jurisdictional and substantive issues under the Income Tax Act, 1961, particularly the interplay between sections 148, 149, and 153A. The Tribunal’s analysis provides clarity on limitation periods for reopening assessments, the definition of “asset” in search cases, and the proper estimation of income from unaccounted transactions. This commentary examines the legal reasoning behind each contested assessment year, highlighting the ITAT’s reliance on binding High Court precedents.
Facts of the Case
The assessee, Mirha Exports Pvt. Ltd., is engaged in the meat export business. A search under section 132 was conducted on 21 January 2023, prompting the Assessing Officer (AO) to issue notices under section 148 for Assessment Years (AYs) 2013–14 through 2023–24. The resulting assessment order dated 20 July 2024 was challenged before the Commissioner of Income Tax (Appeals) [CIT(A)], who partly allowed the assessee’s appeals. Dissatisfied, both the assessee and the Revenue approached the ITAT. The core disputes revolved around (i) limitation of notice for AY 2013–14, (ii) validity of reassessment for AYs 2014–15 to 2017–18 lacking an “asset” representing escaped income, (iii) failure to meet conditions under section 149(1)(b) for AYs 2018–19 to 2020–21, (iv) estimation of gross profit for AY 2021–22, (v) procedural invalidity for AY 2022–23 under normal provisions instead of section 148, and (vi) incorrect application of section 41(1) for AY 2023–24.
Reasoning by the Tribunal
The ITAT, comprising Judicial Member Madhumita Roy and Accountant Member Naveen Chandra, delivered a year-wise analysis.
AY 2013–14 – Barred by Limitation
The Revenue’s appeal for AY 2013–14 was dismissed as time-barred. The notice under section 148 was issued beyond the permissible 10-year period from the end of the relevant assessment year. The Tribunal followed the Delhi High Court’s decision in PCIT v. Ojjus Medicare Pvt. Ltd. (2024) and Filatex India Ltd. v. DCIT (2023), holding that such a belated reopening is unsustainable in law.
AYs 2014–15 to 2017–18 – No “Asset” Representing Escaped Income
The assessee challenged the reassessment for these years on the ground that the escaped income did not correspond to an “asset” as required by the fourth proviso to section 153A read with section 149. The Revenue argued that cash is an asset, but the Tribunal noted that no cash was found during the search; the additions were based on unaccounted sales. Relying on Dinesh Jindal v. ACIT (2024) and Smart Chip Pvt. Ltd. v. ACIT (2025), both of the Delhi High Court, the ITAT quashed the notices because the condition precedent—that the income escaping assessment is represented by an asset (e.g., undisclosed cash, jewellery, or property)—was not satisfied. Mere unaccounted sales do not qualify.
AYs 2018–19 to 2020–21 – Section 149(1)(b) Conditions Not Met
For these years, the notice under section 148 was issued after expiry of three years from the end of the relevant assessment year. To sustain such a reopening, the escaped income must amount to ₹50 lakh or more and be represented by (i) an asset, (ii) an expenditure, or (iii) an entry in the books of account. The Tribunal found that the AO’s additions pertained to unaccounted sales and disallowance of expenses—none of which fall into the statutory categories. The ITAT cited L-1 Identity Solutions Operating Company Private Limited v. ACIT (2025) and ACE Tyres (P) Ltd. v. ACIT (2025) to hold that estimated income does not satisfy section 149(1)(b). Consequently, the notices were quashed.
AY 2021–22 – Gross Profit Rate Reduced
The CIT(A) had confirmed a Gross Profit (GP) rate of 16.5% on unaccounted sales. The assessee argued that since seized material revealed unaccounted purchases and indirect expenses (salary, administrative costs), the Net Profit (NP) rate of 0.87% should have been applied. The Tribunal, following the principle in Indeo Airways (P.) Ltd. v. CIT (2012), reduced the GP rate to 10%, noting that the CIT(A) had acknowledged the existence of unaccounted expenses but still applied a higher GP. The partial allowance reflected a balanced estimation.
AY 2022–23 – Assessment Under Wrong Provisions
The search having been conducted in the financial year 2022–23 (relevant to AY 2023–24), the AO was required to issue a notice under section 148 and comply with section 148B before passing the assessment order. Instead, the AO completed the assessment under section 143(3) without following the mandatory procedure. Relying on the ITAT’s decision in Montage Enterprises Pvt. Ltd. v. DCIT, the Tribunal held the entire proceeding invalid.
AY 2023–24 – Section 41(1) Addition Not Sustainable
The AO originally treated sundry creditors as unexplained cash credit under section 68. The CIT(A) recharacterised the addition as cessation of liability under section 41(1). The assessee contended that the liabilities were duly recorded and not written back; the company continued to acknowledge them. The Tribunal agreed, citing CIT v. Sugauli Sugar Works (P.) Ltd. (1999), CIT v. Shri Vardhman Overseas Ltd. (2011), and CIT v. Kesaria Tea Co. Ltd. (2002). Since there was no remission or cessation of liability, section 41(1) could not apply. The appeal was allowed.
Revenue’s Appeals Dismissed
The Revenue’s appeals for AYs 2013–14, 2014–15, 2017–18, 2018–19, and 2020–21 were dismissed in their entirety, as the foundational notices were invalid.
Conclusion
The ITAT’s detailed order underscores the importance of adhering to procedural safeguards in search and reassessment proceedings. By applying High Court precedents, the Tribunal demarcated the limits of reopening beyond the standard time periods—especially the requirement that escaped income must be traceable to a specific “asset” under the proviso to section 153A. For post-2021 amendments, the judgment reiterates that section 149(1)(b) demands tangible categories of income, not mere estimation. The partial relief granted on GP estimation demonstrates the Tribunal’s willingness to adopt a pragmatic approach when unaccounted expenses are proved. Overall, the decision reinforces taxpayer rights against mechanical reopening and upholds the principle that the AO cannot bypass the statutory framework even in search cases.