LOTUS ADVISORY PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, WARD 14(2)(1), MUMBAI

Briefly stated, the assessee company filed its return of income for AY 2009-10 on 04.10.2009, declaring a loss of Rs. (-) 868/-. Subsequently, the Assessing Officer received information that the assessee had issued shares at a large premium, accordingly, following procedure provided under amended provision of section 148 , he issued notice u/s 148A(b) and the order u/s 148A(d), followed by a notice under section 148 dated 28.03.2014. Thereafter, statuary notices were issued and reassessment proceeding were commenced.

Before the Ld. CIT(A), the assessee sought to place fresh documents on record, related to the share issue for AY 2009-10. As regards reasons for not producing those documents before the AO, the assessee submitted that, firstly, its old records were not fully available, secondly, the management of the company changed in 2011. The assessee stated that it later collected these documents in connection with proceedings for AY 2008-09. It then sought to rely on them before the Ld. CIT(A) as additional evidence under Rule 46A(1)(d) of the Income-tax Rules, 1962.

The Ld. CIT(A) called for a remand report. The Assessing Officer submitted the remand report on 31.07.2025. The remand report noted that the assessee did not comply with notices under section 142(1) dated 16.07.2014 and 10.11.2014. It noted that a show-cause notice for penalty under section 271(1)(b) was issued on 28.10.2014 without any reply. It noted that the assessee responded only on 16.02.2015, close to the time-barring date. On this basis, the remand report held that the delay was attributable to the assessee and that the conditions of Rule 46A were not satisfied.

The remand report also examined the additional evidence on its merits. It pointed out a mismatch between the date funds were received and the allotment date shown on the share certificates. It pointed out corrections and alterations on the share certificates and counterfoils. It noted that the assessee's own earlier submissions had referred to issues about the date of incorporation and allotment. The remand report treated these facts as signs of a pre-arranged transaction.

The assessee filed a rejoinder dated 20.11.2025 submitting that the additional material went to the very root of the addition under section 68. It asked the Ld. CIT(A) to decide the appeal on merits after taking the additional evidence and the rejoinder on record.

On the legal ground, the Ld. CIT(A) held that the reasons recorded referred to share premium of Rs. 5,65,25,000/- for 2,97,500 shares. He noted that no addition was made on this exact figure. He noted that the addition finally made was Rs. 1,26,35,000/-, on a different quantum. He held that this difference did not make the reassessment invalid. He held that the reassessment addressed the same subject-matter as the reasons recorded, namely, share premium and share credits. He relied on CIT v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC), and GKN Driveshafts (India) Ltd. v. ITO, (2003) 259 ITR 19 (SC). He dismissed the additional grounds and upheld the reassessment.

On the addition under section 68, the Ld. CIT(A) held that the assessee must prove three things under section 68: the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. He relied on PCIT v. NRA Iron & Steel (P.) Ltd., (2019) 412 ITR 161 (SC), and CIT v.

Before us, the Ld. counsel for the assessee refereed to ground No. 2 of the appeal and submitted that the reasons for the delay in producing the documents were genuine. He submitted that old records of a company often become difficult to trace after a change in management. He submitted that the additional evidence goes to the very root of the addition. He submitted that the assessee should get a fair opportunity to explain the discrepancies noted in the remand report, since those discrepancies were never separately confronted to the assessee.

On the legal ground, the Ld. Counsel was unable to place before us a copy of the reasons recorded for reopening. He was also unable to place before us any application filed by the assessee before the Assessing Officer raising any objection filed against the reassessment proceedings.

The Ld. Departmental Representative supported the order of the Ld. CIT(A).

We have heard rival submissions and perused the relevant material on record. Firstly, we take up the issue of admission of additional evidence under Rule 46A, since it decides the fate of the addition itself.

Before us, the assessee has given two reasons for the delay, inter-alia, the company's management changed in 2011 and its old records relating to AY 2009-10 were not easily traceable at the relevant time. In our opinion these reasons are genuine and common difficulties and are not far-fetched excuses. We find those reasons as sufficient to explain the delay.

Since those evidences have not been properly examined on merits by the Assessing Officer, we restore the matter to his file. The Assessing Officer will verify the additional evidences. He will examine the identity, creditworthiness and genuineness of the share premium credit of Rs. 1,26,35,000/- afresh. He will specifically deal with the discrepancies noted in the remand report dated 31.07.2025. He will give the assessee a fair opportunity to explain these discrepancies. He will then pass a fresh order in accordance with law. The order of the Ld. CIT(A) on Ground Nos. 1, 2 and 3 is set aside. These ground Nos. 2 and 3 of the appeal are allowed for statistical purposes.

We turn now to the ground No. 1 of the appeal challenging validity of reassessment. This ground challenges the notice under section 148 and the reassessment under section 147.

A challenge of this kind requires the reasons recorded/ order u/s 148A(d) issued by the Assessing Officer to be placed on record. It also requires to go through order u/s 148A(d) and application filed raising objections to reassessment proceedings before the Assessing Officer, as laid down in GKN Driveshafts (India) Ltd. v. ITO (supra).

In the present case, the assessee has not filed any application raising objections filed against the reassessment. Without this material, we cannot examine whether the reopening meets the test of laid down in GKN Driveshafts (India) Ltd. v. ITO (supra). We cannot examine whether the reassessment survives on the ground that objection of the assessee was not disposed off by the AO by way of a speaking order. We therefore do not decide this ground at this stage. We leave it open. The assessee may raise this ground again at the appropriate stage, once the necessary record is available, including before the Assessing Officer in the set-aside proceedings if such record can be placed on file at that stage. The ground no.1 of the appeal is dismissed as infructuous.

In the result, the appeal of the assessee is allowed partly for statistical purposes.