TaxTMI 
TaxTMI 
2026 (7) TMI 479
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.... 2011-12 28.07.2025 143(3)/147 of the Act 4. Anoop Jain 6040/Del/2025 2011-12 29.07.2025 143(3)/147 of the Act 5. -Do- 6041/Del/2025 2012-13 -Do- 147 r.w.s. 143(3) of the Act 6. Ritu Jain 5970/Del/2025 2014-15 28.07.2025 -Do- 2. The issues involved in all captioned appeals are common, therefore, they have been heard together and accordingly, adjudicated by a common order. 3. First we take appeal of the assessee in ITA No. 5962/Del/2025 for Assessment Year 2011-12 in the case of Anoop Jain HUF. ITA No. 5962/Del/2025 [Assessment Year 2011-12] [Anoop Jain HUF] 4. Brief facts of the case are that the assessee has filed the return of income on 29.09.2011, declaring total income of INR 2,03,90,462/ -. The assessment was completed u/s. 143(2) of the Act in terms of the order passed on 27.02.2014 wherein after examining the income declared under the head "Income from Business and Income from Capital Gain and Income from Other Sources" were duly examined and after verification, returned income was accepted. Thereafter, based on the information received from the Investigation Wing, Mumbai that assessee has sold shar....
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.... 147 of the Act. 9. Before us, Ld.AR for the assessee submits that as per section 147 of the Act, AO must have reason to believe of escaped income and that believe must be raised on tangible material having live-link with the alleged escapement and not on mere change of opinion. In the instant case, assessment has already been completed u/s. 143(3) after making all the necessary enquiries and verification of the income declared by the assessee under various heads of income. AS per ld. AR, the notice u/s. 148 was issued after the expiry of four year form the end of the relevant assessment year and therefore, as per first proviso to section 147 of the Act, AO should record the satisfaction that assessee has failed to disclosed fully and truly all material facts necessary for the assessment. 10. Ld.AR submits that during the course of assessment proceedings completed u/s. 143(3) of the Act, the AO has made detailed enquiries about the income declared by the assessee under the head Income from Business where the assessee has declared income from trading in derivatives. Further under the head Income from Capital gains, assessee has declared short term and long terms capital gains ....
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....he Assessing Officer, is not a mere question of limitation, but the very foundation of his jurisdiction. These words import the presence of the following four essential ingredients: (a) some material or materials and not mere fancy, imagination, speculation, suspicion; (b) a nexus between such material and the belief of escapement of income from assessment; (c) an application of mind by the Assessing Officer to such material; and (d) an inference based on reason drawn tentatively by the Officer that income has escaped assessment. Hence, it is very clear that the basis for formation of belief and recording of the reasons as to escapement of income cannot be based on mere suspicion and conjectural inferences not backed by any tangible evidence." - Para 3, ITA No. 4153/Del/2019 12. In none of the three sets of reasons recorded is any of these four conditions satisfied with respect to any specific Appellant. The Hon'ble Jurisdictional High Court in Principal Commissioner of Income-tax (Central) v. K.R. Pulp and Papers Ltd. [2025] 175 taxmann.com 278 (Del.) held: "The AO did not have any specific details regarding the income that was alleged to have escaped assessm....
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....ee received a bogus accommodation entry. In Principal Commissioner of Income-tax v. Meenakshi Overseas Pvt. Ltd. [2017] 395 ITR 677 (Del.), the Hon'ble Court held: "In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment." 16. In Commissioner of Income-tax v. Fair Finvest Ltd. [2014] 44 taxmann.com 356 (Del.), the Hon'ble Delhi High Court held that where the Assessing Officer does not independently apply his mind to the information received from the Investigation Wing and merely relies on the Wing's conclusions, the reopening is without valid jurisdiction - the information received is not per se "tangible material" unle....
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....h discloses escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval." - Para 15, Signature Hotels Pvt. Ltd. v. ITO [2010] 338 ITR 51 (Del.), as cited in M/s Marvelous Cement Pvt. Ltd. v. ITO, ITA No. 4153/Del/2019 20. The Hon'ble Delhi High Court in Principal Commissioner of Income-tax v. Sabh Infrastructure Ltd. [2017] 398 ITR 198 (Del.) (SLP dismissed: ACIT v. Sabh Infrastructure Ltd. [2024] 159 taxmann.com 184 (SC)), at para 19, crystallised four requirements, each of which has been violated in the present cases: "(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the Assessing Officer for obtaining the approval of the Superior Officer should itself be provided to the assessee ...; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the Assessing Officer for reopening the ass....
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....42(1) questionnaire. All primary facts were before the original Assessing Officers. There is no finding in either set of reasons that any specific document or transaction was concealed or withheld. 24. The law on this issue is authoritatively settled by the Hon'ble Bombay High Court in Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332 (Bom.), which laid down that the Assessing Officer, in the reasons recorded, must disclose which specific fact or material was not disclosed by the assessee fully and truly and why that fact was necessary for his assessment. A bare allegation of non-disclosure, without identifying the particular undisclosed fact, does not satisfy the condition precedent of the First Proviso. This principle has been reaffirmed by the Hon'ble Bombay High Court in Global Earth Properties & Developers (P.) Ltd. v. Union of India [2026] 183 taxmann.com 64 (Bom.) (para 22), where it was further held that the reasons are required to be read as they were recorded and cannot be allowed to be improved subsequently. 25. In Commissioner of Income-tax v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) (affirming [2002] 123 Taxman 433 (Del.), the Hon....
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....on materially identical facts (reassessment beyond four years, original assessment under section 143(3), first proviso attracted), this Tribunal held: "Admittedly in the instant case, the reopening has been done beyond four years from the end of the relevant assessment year and original assessment stood completed under section 143(3) of the Act. Hence, the first Proviso to Section 147 of the Act comes into operation. It is the duty of the Learned AO to bring on record with cogent evidences that there was indeed a failure on the part of the Assessee to make full and true disclosure of all material facts that are relevant for the purpose of assessment, which in the instant case, in our considered opinion, the Learned AO had failed to do so. Hence, there is a violation of first Proviso to Section 147 of the Act committed by the Learned AO while recording the reasons and also in the consequential framing of reassessment proceedings. The reopening of assessment deserves to be quashed on this count also." - Para 5, ITA No. 4153/Del/2019 29. This Tribunal further held in the same order: "Once the Assessee furnishes the primary facts before the learned AO during ....
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....er consideration were not filed during the course of assessment proceedings and the same may be embedded in annual report, audit, P&L A/c, Balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For the a forestated reason it is not a case of change of opinion by the AO." 33. The above paragraph is contradicted, on multiple counts, by the AO's own reasons recorded. The contradictions are set out below: What Para 8.1 Claims What the Reasons Recorded Themselves Show "The issues under consideration were never examined by the AO during the course of regular assessment." Para 1 of the same reasons records: "the case of the assessee was selected for scrutiny assessment through CASS and the assessment was completed at assessed income of Rs. 2,03,90,462/- u/s. 143(3) of the IT Act, 1961 on 27.02.2014." A 143(3) scrutiny assessment, by definition, involves examination of the return and transactions therein, including capital gains. "The facts are corroborated from the contents of notices issued by the AO u/s. 143(2)/142(1) and order sheet entries recorded during the assessment proceedings u/s....
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....res at any point. The AO's entire narrative about "bogus exempt LTCG accommodation entries" does not correspond to any transaction actually entered into by the HUF: the HUF held SVC Resources for less than twelve months (making it a short-term asset), offered the gain to tax, and paid tax on it. The addition under section 68 for an alleged accommodation entry in the form of exempt LTCG is factually baseless - the HUF never claimed any exempt LTCG on SVC Resources. IN RE: THE APPELLANTS ARE NOT NAMED IN THE INVESTIGATION WING REPORT AS ILLEGITIMATE BENEFICIARIES 37. A further and significant submission is that neither the Appellants nor their brokers are named in the Investigation Wing report as illegitimate beneficiaries of the alleged SVC Resources scheme. This Tribunal, in Anoop Jain v. ACIT [2020] 114 taxmann.com 550 (Delhi Trib.) at Paragraph 25, recorded: "Surprisingly, neither the assessee nor his brokers are named as illegitimate beneficiaries to bogus long term capital gain in any of the alleged statements of the operators/broker or reports/orders of the SEBI or the Investigation Wing." 38. That finding - a finding of fact by this Tri....
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.... " 13. From the perusal of the aforesaid observations of the AO in the assessment order passed u/s. 143(3), it is observed that the AO while passing the assessment order, has examined all the details with respect to the income declared under the head "capital gains" after examining the details called for from the assessee. It is the case where all the facts necessary for the assessment were truly and fully disclosed therefore, after expiry of the period of 04 years if any notice is issued u/s. 148, the AO is required to state what fact was not fully and truly was disclosed which was necessary for the assessment. 14. Before moving further, the provision of section 147 needs to be considered: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may b....
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....t under section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the Assessing Officer that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of section 147 (1). [Para 24] The first part of section 147(1) of the Act requires the Assessing Officer to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject-matter of examination. The Assessing Officer being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe, the process of arriving at such satisfaction cannot ....
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....er consideration, the Petitioner had traded in the scrips of both IISL and SRK, which led to short term capital loss. 27. It is clear from the information received from the Investigation Wing and Mr. Anil Kedia, that the same was general in nature and did not point towards the involvement of the Petitioner in the arrangement of providing accommodation entry by contriving bogus short term capital loss. From the aforementioned information, it cannot be concluded that all the transactions with respect to the shares of IISL and SRK were sham in nature. Further, there is nothing to show that the information produced above was applicable to the Petitioner. 28. In the reasons provided for issuance of the impugned notice, the AO stated that the Petitioner had purchased the shares of SRK on 21.08.2013 at the average price of Rs. 167.63 per share and sold off at the average price of Rs. 35.05 per share on 24.03.2014, whereas the shares of IISL were purchased on 21.08.2013 at the average price of Rs. 41.10 per share and sold off at the average price of Rs. 8.26 per share on 06.03.2014. The AO concluded that through investments in the said shares, the Petitioner created bogus....
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....ndi recorded on which the AO has relied upon, the AO couldn't bring on record co-relation with the income escaped in the hands of the appellant and if the name of appellant was explicitly surfaced from the statements. 19. In the case of Well Trans Logistics India (P.) Ltd. v. Addl. Commissioner of Income-tax reported in [2024] 166 taxmann.com 72 (Delhi), the Hon'ble Jurisdictional High Court has held as under ".... there is no close nexus" or live link between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. [Para 25] Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line....
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....essment by recording the satisfaction that assessee has failed to disclose truly and fully all the material facts necessary from the assessment however, the material which has been placed reliance for recording such satisfaction is nothing but the information provided by the Investigation Wing, Mumbai and mere it is change of opinion as has been held by the Hon'ble Supreme Court in the case of CIT us Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC). 24. In view of the above discussion and respectfully following the above-mentioned decisions, it has been held AO has also failed to establish the nexus between the tangible material available and therefore, the reason to believe that income has escaped the assessment and the notice issued u/s. 148 of the Act is invalid and the consequent reassessment order is bad in law. 25. Coming to Ground of appeal No. 3 & 4 of the assessee are with respect to the merits of the addition, wherein assessee has claimed that it has declared STCG from sale of shares of SVCRL for which our attention is invited to the computation of income, placed at pages 25 to 37 of PB, wherein the capital gain from the sale of shares of SVCRL is fo....
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.... dates during the year under consideration. The Assessee has claimed exemption under section 10(38) of the gain arising from the said transaction. The AO relied on the investigation report in which the script names M/s. SVC Resources Ltd., was held to be a Penny Stock and accordingly, reopened the assessment of the Assessee for the reason that the Assessee has transacted in the said script. We noticed that the reason for AO to make addition in the hands of the Assessee is that the price of the script is jacked up within a short period of time and that the financial performance of the company does not support the increase in the share prices. We further, noticed that the AO though has elaborated on the modus operandi for how Penny Stock companies are used for converting cash, has not recorded any specific findings to incriminate the Assessee or to establish that the assessee in any way is involved in rigging the price of the shares. The assessee in order to support the genuineness of the transaction has submitted all the relevant documents in the form of broker bill, contract summary, bank statement, etc. (page 39 66, 125, and 149 of paper book) It is also relevant to note that the ....
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.... reassessment order passed is hereby, quashed. 32. Now we take Ground of appeal Nos. 3 & 4 of the assessee on account of confirming the addition in respect of genuine sale proceeds of share and alleged commission expenses. 33. Further since the STCG from the sale of shares was accepted even in the reassessment order thus any further addition with respect to entire sale proceeds would be double addition. Further the assessee has filed all the necessary details to prove the genuineness of the transaction of purchases and sale of shares of SVCRL and no doubts were raised in the same by the AO who has made the addition merely on the basis of report of Investigation wing Mumbai. Since all the facts are identical to the facts of case of Anoop Jaun HUF for AY 2011-12 thus, by following the observations made herein above in this regard while allowing the appeal in ITA NO. 5962/Del/2025 which are Mutatis Mutandis applicable to the facts of the present case, the instant appeal is also allowed. 34. In the result, appeal of the assessee is allowed. ITA No. 5970/Del/2025 [Assessment Year 2014-15] [Ritu Jain] 35. Ground of appeal No. 1 raised by the assessee is general in natur....
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....vations made herein above in this regard while allowing the appeal in ITA No. 5962/Del/2025 which are Mutatis Mutandis applicable to the facts of the present case, the instant appeal is also allowed. 41. In the result, appeal of the assessee is allowed. ITA No. 6008/Del/2025 [Assessment Year 2012-13] [Anoop Jain HUF] 42. Brief facts of the case are that the assessee has filed the return of income on 30.09.2012, declaring total income of INR 33,32,410/ -. The case of the assessee was re-opened for the reason that assessee has declared the capital gain from the scrip namely Unisys Software and Holding Ltd. ("USHL") which as per information provided by the Investigation Wing, was held as a penny stock company and used for providing accommodation entries of capital gains to various beneficiaries. The AO alleged that the assessee is one of the beneficiaries who had benefitted by exempted income in the shape of bogus LTCG from the sale of shares of USHL. Accordingly, the addition was made u/s. 68 of the Act of INR 80,91,870/- and further an addition of INR 1,61,839/- was made as commission paid @ 2% for obtaining accommodation entries of bogus LTCG in the grab of penny scrip.....
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....error was pointed out in the assessment order which is very cryptive. Ld.AR further drew our attention the case of the Co- ordinate Bench of the Tribunal in Meenu Goel vs ITO reported in [2018] 94 taxmann.com 158 (Del. Trib.) wherein Co-ordinate Bench has held the trading results in the share of USHIL as genuine and held the capital gain as valid. He therefore requested that no addition should be made by hooding the trading in USHIL solely on the report of Investigation Wing without bringing on record any contrary material. 46. Heard the contentions of both the parties at length and perused the material available on record. With respect to Ground of appeal No. 1 of the assessee is that the reasons recorded were available for re-opening of assessment based on the borrowed satisfaction. Before us, both the parties have fairly admitted that facts involved in this appeal are identical in the facts as existed in ITA No. 5962/Del/2025 in the case of Anoop Jain HUF for AY 2011-12 and only different in the present appeal is that assessment was completed u/s. 143(1) and not u/s. 143(3) of the Act. However, the facts remained that the AO has proceeded to re-open the assessment on the basi....
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....heard both the parties and perused the relevant records available with me, especially the orders of the revenue authorities and the case law cited by both the parties. I note that assessee has earned Long Term Capital Gain amounting to Rs. 18,46,600/- during the financial year 2013-14 and the same has been claimed exempt under Section 10(38) of Income Tax Act, 1961. The assessee had purchased of 45,000/- shares of Unisys Software Holding Industries Ltd amounting Rs. 9,38,600/- at a premium of Rs. 20.85 per share in physical form. Out of the aforesaid 45000/- Shares assessee sold of 8000 Shares only i.e. 17.77%. Thus, the major part of the Shares i.e. 82.33% are still in the hand of the assessee. In my view the assessee just wanted to enter into the transaction to earn exempted capital gain, but the assessee did not sell all the share 45000 shares instead of sale of a part i.e. 8000 shares only when that time was the best price ever. All the transaction were made through account payee cheque / banking channel and assessee had purchased share in financial year 2009-10 and sold the same in the financial year 2013- 14 resulting in Long Term Capital Gain. The assessee has submitted vari....
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....the Hon'ble High Court of Punjab & Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017 wherein it has been held as under :- "2. The following questions of law have been raised :- (i) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in upholding the order of the CIT(A) deleting the addition of Rs. 4,11,77,474/- made by the AO on account of sham share transactions ignoring an important aspect that the transaction of shares showing their purchase price at Rs. 11,00,000/- and sale consideration at Rs. 4,23,45,295/- within a period of less than two years / purchases of shares made in cash not cheque that too before shares got dematerialized / worth of the company at the time of purchase / sale of shares not proved- All suggest non-genuineness of the said transaction? (ii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of Rs. 4,11,77,474/- made by the AO on account of sham share transactions, whereas the CIT(A) himse....
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....t this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In these circumstances, following the judgment in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal. 6. Question (iv) has been dealt with in detail by the CIT(A) and the Tribunal. Firstly, the documents on which the AO relied upon the appeal were not put to the Assessee during the assessment proceedings. The CIT(A) nevertheless considered them in detail and found that there was no co- relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises. 7. In the circumstances, the appeal is dismissed." 7. Keeping in view of the facts and circumstances of the case as explained above and respectfully following the precedent, as aforesaid, the addition amounting Rs. 18,46,600/- made by the AO and confirmed by the Ld. CIT(A) is hereby deleted and ground raised by the assessee is allowed." 49. It is further observed that in ....
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....,870/ -. 52. Since we have held the capital gain as genuine, the addition made on account of commission for obtaining such alleged LTCG has no legs to stand. Accordingly, the same is hereby deleted. 53. In the result, appeal of the assessee is allowed. ITA No. 6041/Del/2025 [Assessment Year 2012-13] [Anoop Jain] 54. Before us, both the parties fairly agreed that the facts in the present appeal are similar to the facts in ITA No. 6008/Del/2025 for AY 2012-13, thus, by following the aforesaid observations in ITA No. 6008/Del/2025 for AY 2012-13 which are Mutatis Mutandis applicable to the facts of this case also, the reopening on the basis of borrowed satisfaction is held as invalid Furthe the addition made on account of Capital gain in the present appeal is also deleted. accordingly, all Grounds of appeal raised by the assessee in the captioned appeal, are allowed. 55. In the result, appeal of the assessee is allowed. ITA No. 6009/Del/2025 [Assessment Year 2015-16] [Anoop Jain HUF] 56. The facts of the case are that the assessee has e-filed its return of income, declaring total income of INR 1,40,44,401/- on 30.11.2015. The case was selected through compul....
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.... of the Act and no doubts were raised with respect to the investment made. During the year under appeal, he has sold the shares which were purchased through the member broker and sole through member-broker in Mumbai Stock Exchange. The assessee has filed following details with respect to the genuineness of the transactions :- (i) Share application form for purchase of shares (ii) Copy of prospectus for providing placement filed before Registrar of company (iii) Copy of the representation made by the company for providing placements. (iv) Copy of bank statements for making investment (v) Details of investment summary as on 31.03.2013 wherein investments in the shares of GFSL trading. (vi) Copy of DEMAT account statement (vii) Copy of evidence of stock splits (viii) Copy of contract notes for sale of shares (ix) Copy of ledger accounts in the books of brokers (x) Copy of bank statement evidencing the payments received (xi) Copy of Form 10DB certificate regarding payment of STT. 61. Ld.AR submits that none of the aforesaid evidence was held as ingenuine nor any doubts were raised with....
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....is one of the shares purchased by him which was sold during the year. 66. In the case of DCIT vs Nisha Shantaram Pokle (supra), the Co-ordinate Bench of ITAT, Mumbai has considered the decision of the SEBI with respect to the inquiries carried out in the case of GFSL and made following observations in para 9 of the order as under :- 9. "We find that AO during the assessment proceedings has asked the assessee to prove the claim of LTCG of Rs. 5,67,41,214/- (according to assessee LTCG claimed is Rs. 5,72,25,721/-) from sale of shares of M/s. Greencrest (earlier known as M/s. Marigold). And pursuant to such a direction, the assessee had filed the primary documents as discussed at para 4 to 6 (supra) to prove the purchase of shares of M/s. Marigold (now known as M/s. Greencrest Financial Services Ltd) and the same is not repeated for sake of brevity. Thus, we find that assessee had filed primary documents found placed at page 30 to 54 of the PB, which shows that assessee had A.Y. 2015-16 Nisha Shantaram Pokle applied/ allotted the shares of M/s. Marigold (later known as M/ s. Greencrest Financial Services Ltd on 11.02.2013 and sold the shares of M/s. Greencrest (between Aug....
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.... incriminate assessee being part of modus-operandi to do any illegal acts. As noted, the AO has been influenced by the investigation report submitted by the Investigation Wing of Department functioning at Kolkata. It is true that some unscrupulous entry operators had devised methods/modus- operandi to beneficiaries to facilitate laundering their black money to white through pre-planned receipt in the form of bogus LTCG, loan etc. But from perusal of the discussion of AO, we find it to be general in nature and there is nothing in the discussion to link/ connect the assessee somehow with the modus-operandi of the Investigation Wing or Report. Since there is neither any evidence/ material to incriminate the assessee in the investigation report nor any material to suggest assessee/broker being part of the nefarious conspiracy or abetment, A.Y. 2015-16 Nisha Shantaram Pokle such a report of investigation wing cannot be of any aid to the revenue and thus AO erred in placing reliance on such report to draw adverse inference against assessee; and Ld.CIT(A) rightly appreciated the facts and judicial precedents and allowed the claim and deleted the addition made by AO. 67. It is observed ....