MR. RAVI TAMMANSA KATWA,BELAGAVI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1, BELAGAVI

आयकरअपीलीयअधिकरण, पणजीपीठ, पणजी INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, BENCH: DB (VIRTUAL) BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA 96/PAN/2024 & ITA.222/PAN/2025 निर्धारणवर्ा/AssessmentYear: 2011-12) MR. NITIN TAMMANSA KATWA PLOT NO. 782, KATWA CRYSTAL, 7TH CROSS BHAGYANAGAR, BELAGAVI-590006, KARNATAKA. ACIT, CIRCLE - 1(1) PAN (ALQPK1600B) F. K. COMMERCIAL COMPLEX, OPP. Vs. CIVIL HOSPITAL, MR. RAVI TAMMANSA KATWA DR. B. R. AMBEDKAR ROAD PLOT NO. 782, KATWA BELAGAVI-590001, CRYSTAL, 7TH CROSS KARNATAKA. BHAGYANAGAR, BELAGAVI-590006, KARNATAKA. PAN (AFLPK5290C) अपीलधर्थीAppellant प्रत्यर्थी Respondent

अपीलधर्थीद्वधरध/Appellant ShriNeelkanthKhandelwal.AR (Virtual) represented by: प्रत्यर्थीद्वधरध/Respondent Shri Jeetendra Kumar.CITDR represented by: (Virtual)

सुिवधईकीतधरीख/Date of hearing: 21-05-2026 घोर्णधकीतधरीख/Date of pronouncement: 04-08 -2026 आदेश / ORDER PER PAVAN KUMAR GADALE, JUDICIAL MEMBER:

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA These two appeals are filed by the different assessee against the separate orders of NFAC/ CIT(A) passed u/sec 147 r.w.s. 143(3) and u/sec 250 of the Income Tax Act for A.Y.2011-12.

The appellant contends that on the facts and in the cirumstances of the case and in law, the issue of notice under Section 148 is without jurisdiction, bad in law and hence, needs to be quashed.

The appellant contends that on the facts and in the circumstances of the case and law, the CIT(A) ought not to have upheld the action of the Assessing Officer in considering the transaction of sale of shares of Comfort Intech Limited as bogus inasmuch as the said shares have been purchased during an earlier years; the same having been sold shall necessarily give rise to capital gains and the impugned shares being long term capital assets, the capital gains Rs. 4,07,94,331/- have been clamied to be exempt from tsx by virtue of Section 10(38) of the Act and as such, the impugned actionof the CIT(A) in upholding the action of the Assessing Officer re addition under Section 68 of the Act is not justified.

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA 3. The CIT(A) erred in upholding the action of the Assessing Officer in making the impugned addition and framing the impugned order in violation of and utter disregard to, the principles of natural justice.

The appellant contends that on the facts and in the circumstances of the case and in law, the Assessing Officer ought to have followed the principles of natural justice, and having not followed, the impugned assessment order is bad in law and the CIT(A) ought to have quashed the same.”

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA Rs.4,07,94,331/- and the assessee was asked to furnish the details of shares purchase, mode of payment, share certificate, broker details, contract note, dematerialization details, bank details etc. In compliance, the assessee has furnished the information on31.10.2018 with details of purchase, allotment letter, bank statements and sale of shares, contract notes and demat account etc. Further It was explained that, the assessee has purchased (i)20,000 equity shares of Rs.10/- paid up each in the F.Y 2006-07 for Rs.1,70,534/- through online/stock market stock broker M/s K G Vora Securities Ltd (ii) 25,000 equity shares of Rs.10/-paid up each in the F.Y.2007-08 through online/stock market , stock broker M/s Religare Securities Limited. For Rs.3,88,185/- and (iii) 2,50,000 shares of Rs.10/-paid up each preferential allotment in F.Y.2008- 2009 (With Lock in Period) from the company Comfort Tech Ltd for Rs.42,77,500/- through account payee cheques and banking channel subjected to STT and the shares were transferred in the assessee name and were credited to assesse demat account maintained with the M/s Stock Holding Corporation Of India Limited and there was shares split. Whereas the assessee has sold 29,50,000 shares through SEBI Registered Broker BSE M/s.Religare Securities Limited for a consideration of Rs.4,56,47,072/- and earned Long Term Capital Gains (LTCG)of Rs.4,07,94,331/- and claimed exemption U/sec10(38) of the Act. 4. The AO has dealt on the purchase invoice /confirmation, sale contract notes, bank statements, demat account of shares credit on purchase, shares split, sale of shares and relied on the various factual aspects of share trends, modus operandi and report of the Kolkata Investigation Wing statements recorded, BSE data and has doubted the earning of long term capital gains on shares. Further the AO find that there is no correlation of price rise and the financial/

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA fundamental statements of the company. Finally the AO was not satisfied with the explanations and material information and observed that the transactions are not genuine and made addition of sale proceeds u/sec 68 of the Act of Rs.4,58,73,227/- and assessed the total income of Rs.4,91,17,457/- and passed the order U/sec 147 r.w.s143(3) of the Act dated 11.12.2018. 5. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts, findings of the AO and submissions of the assessee, in respect of validity of notice u/sec148 of the Act and addition u/sec 68 of the Act but has confirmed the action of the AO and dismissed the assesse appeal. Aggrieved by the order of the CIT(A), the assessee has filed appeal with the Hon’ble Tribunal. 6. At the time of hearing, the Ld. A.R. has restricted his submissions only on the validity of issue of notice u/sec 148 of the Act is bad in law and the reopening of assessment is without jurisdiction and non application of mind and on barrowed satisfaction. Further the Ld.AR has demonstrated the reasons recorded u/sec148(2) of the Act, were the Assessing Officer has relied on the information received from the ITD system and DIT(Investigation) that the assessee is a beneficiary of accommodation entry of LTCG/STCL and has sold the shares on the stock exchange without any purchase of shares on exchange. Whereas the assesse has disclosed long term capital gains on sale of shares on stock exchange on which STT was paid and also the purchases of shares was provided with the evidences. And the reasons specified are from the general investigation conducted by the Kolkata Investigation Directorate, and said information discloses that the trading in listed penny stocks has provided bogus accommodation entries to the beneficiaries. Further the assessing officer relied on Kolkata investigation directorate information and the survey proceedings in the business premises of First Financial

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA Services Limited and the statement recorded. The Assessing Officer nowhere mention/ whisper about the share/scrip name and basis of relevance of investigation report, hence the reasons recorded are on incorrect and insufficient facts and on barrowed satisfaction and the reopening of assessment is without jurisdiction and is invalid. Further it was mentioned that the CIT(A) has erred in sustaining the validity of issue of notice u/sec148 of the Act and addition under section 68 of the Act overlooking the facts and submissions that the purchase & sale of shares are genuine and the assessee has substantiated with various details with both the authorities. Further, there is no scope for the AO to make the additions based on the surmises and conjectures as the assessee has filed the documentary material evidence in support of the claim. The purchase of shares are genuine through banking channels and the assesse has substantiated with various details referred in the assessment order. The Ld. AR explained the shares purchased through stock market and preferential allotment of shares credited to the demat account maintained with the Stock holding Corporation of India Limited along with other shares and securities held by the assesse. The assesse is a regular investor in shares and securities and derives income from other sources, interest income and the dividend income. The Ld. AR mentioned that no independent enquiry was conducted by the revenue. The Ld.AR substantiated the submissions with the paper book and judicial decisions and prayed for allowing the appeal and shall file submissions on the legal issue in these appeals. Per Contra, the Ld.DR submitted that the share transactions are not genuine and are doubted and the Ld.DR supported the order of the CIT(A) and submissions.

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA proceedings though the reasseement notice issued by the Assessing officer is bad in law and further the CIT(A) erred in confirming the action of the assessing is sustaining the addition overlooking the voluminous material evidences filed in the assessment and appellate proceedings. The Ld.AR has restricted his submissions on the validity of issue of notice and reassessment proceedings. The Ld.AR contentions are the Assessing Officer has relied on the information received from the ITD system and DIT(Investigation) that the assessee is a beneficiary of accommodation entry of LTCG/STCL and the sold the shares on the exchange without any purchase of shares on exchange. Further the assessing officer relied on Kolkata investigation directorate information and the survey proceedings in the business premises of First Financial Services Limited and the statement recorded.And the Assessing Officer nowhere mention/ whisper about the share/scrip name and basis of relevance of investigation report, hence the reasons recorded are on incorrect and insufficient facts and on barrowed satisfaction and the reopening of assessment is without jurisdiction and is invalid. We considered it appropriate to refer to reasons recorded for reopening assessment for A.Y.2011-12 as under: “Reason for reopening/ belief that income has escaped assessment as followes:- The assessee filed the return of income for A.Y. 2011-12 on 23.09.2011 declaring total income of Rs. 32,44,230/- The investigation conducted by the Kolkata Investigation Directorate reveals 83 listed penny stocks and has provided detailed findings indicating bogus LTCO/STCL entries claimed by large number of beneficiaries. The modus operandi involving operators, intermediaries and the beneficiaries has been detailed in the investigation report prepared and disseminated by the Kolkata Directorate. The basic aim of the Penny Stock scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gain. This entry of LTCO is taken by selling the shares on the stock exchange and registering the proceeds arising out of the sale of shares into the books as LTCG. For

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA implementing this scheme, shares of some Penny Stock Company are used. The same modus in adopted for providing accommodation entry of bogus loss. The assessment needs to be reopened in view of the following reasons: The assessee has earned LTCG/STCL through trading in a penny stock. As per the information received form Kolkata Investigation Directorate it is seen that the assessee has made sale of shares in which the sale value during the F.Y. 2010-11 relevant the asst. year 2011-12 is Rs. 45873227.75 and sale quantity is 2950000.00 and gain based on average sale price i.e. (Rs. 15.55) and average purchase price and number of shares sold during the F.Y. 2010-11 is Rs. 4,58,73,227/- and there is no purchase shown. The Client which has only sold penny stock on the exchange without any purchases on the exchange. This type of client is more likely to be LTCG Beneficiary.

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA

“1. Refer para 1. of the reasons recorded for re-opening of assessment Assessing Officer mentions and there is no purchase shown. The Client has only sold penny stock on the exchange without any purchase on the exchange." The Assessing Officer on facts is incorrect to mention that there are no purchases, further, the Assessing officer mentions that there are no purchases on the Exchange is also incorrect inasmuch as there are purchases on the Exchange-refer page no 162 of the paper book-refer purchase no 1 and purchase no 2 are on the Exchange contract notes of purchase no 1 and purchase no 2 are there on page nos 163 and 164 of the paper book. 2. Refer para nos 2, and 3. of the reasons recorded for re- opening of assessment-On going through the same, it is noteworthy to the mention that the Assessing Officer mentions Kolkata Investigation Directorate, survey proceedings in the case of First Financial Services Limited, sworn statements of various persons etc. The Assessing Officer nowhere mentions the scrip in the present case which is Comfort Intech Limited and how are Kolkata Investigation Directorate etc. are relevant to the assessee. The least that the Assessing Officer ought to have done is mention in the reasons recorded for re-opening of assessment the scrip in the present case which as mentioned above is Comfort Intect Limited. For submission point nos 1 land 2 Refer decision of Bombay High Court in the case of Hindustan Lever Ltd. reported in 268 ITR 332 which categorically mentions "It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between 9

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. To sum up, it is contended that the reasons recorded for re-opening of assessment are on facts, incorrect, insufficient and thus, the re- opening of assessment fails and the consequential assessment order ought to be quashed. The facts in the case of Mr. Ravi Katwa are similar to the facts in the case of Mr Nitin Katwa and thus, the submissions and contentions are similar.” 9. The Ld.AR submitted that the Assessing officer has grossly failed to link the information of investigation with the facts of the assessee on the purchase of shares and the name of the script was not mentioned and there is no independent application of the mind by the Assessing Officer. Further, the Ld.AR mentioned that the reopening is based on the lack of enquiry by the Assessing officer before exercising jurisdiction for reopening u/sec 148 of the Act and relied on the judicial decisions as under;-

(i).Hindustan Lever Ltd Vs R.B.Wadkar Assisstant Commissioner of Income Tax And Others (268 ITR 332)(Bombay

(ii).Smt.Tanu G Agarwal Vs DY,CIT-10(3)(2) ITA.No.2325/MUM/2018

(iii).AnilChothmal Patodia Vs NFAC Mumbai.ITA.NO.4060/MUM/2023.

(iv).Hotel New Niyaz Vs ACIT Belgaum ITA.18 to 22/PAN/2022.

(v),P R C I T -5 Vs Shodiman Investments (P) Ltd.(422 ITR 337)(Bombay),

(vi).C I T Vs Sfil stock Broking Ltd(233 C T R 69)(Delhi).@@@@

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA 8. “After hearing both the parties and perusing the records as placed before us,…………The AO has merely relied on the information received from Pr. DIT (Inv) and also on ITD system and re-opened the assessment without any application of mind. The AO has also not linked the information to the facts of the assessee as disclosed in the return of income. Under these facts and circumstances, the AO has not recorded his own satisfaction on the basis of facts available before him in the return of income and the information received but acted on the basis of borrowed satisfaction. In our considered opinion the re-opening of assessment is bad and cannot be sustained. The case of the assessee is covered by a series of decisions of the jurisdictional and other High courts wherein it has been held that re- opening has to be on the basis of satisfaction of AO and not on borrowed satisfaction. These cases are discussed as under:-

a) In the case of Pr. CIT Vs. Shodiman Investments Pvt. Ltd. (supra), the Hon'ble Bombay High court has held that where the AO has merely issued re-assessment notice on the basis of intimation from DDIT(Inv)., the re-opening is bad in law as re-opening notice has to be issued by the AO on the basis of his own satisfaction and not on borrowed satisfaction. The relevant paras are reproduced as under:-

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA 15. Therefore, in the above facts, the view taken by the Impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law."

b) In the case of Nu Power Renewables Pvt. Ltd. vs DCIT, Circle1(2) supra the Hon'ble jurisdictional High Court has held that where there is no independent application of mind on the part of the AO to the information received from DDIT(Inv), the reopening of assessment on the basis of such information was without jurisdiction. The Hon'ble court has observed that information received has to be examined in the context of the facts on record before coming to a view that income chargeable to tax has escaped assessment on account of failure to disclose fully and truly all relevant facts and in absence of that it amounts to outsourcing the reasons to believe and impugned notice is without jurisdiction.

c) In the case of, Pr CIT Vs Meenakshi Overseas Pvt Ltd. supra, the Hon'ble Delhi High Court has held that where there is no Independent application of mind by the AO to tangible material which formed the basis for reasons to believe that income had escaped assessment and the reasons did not demonstrate the link between the tangible material and formation of reasons to believe that income had escaped assessment. The Hon'ble court observed that the AO has not made any efforts to set out the portion of the investigation report which contains information specific to the assessee and the AO does not even examine the return of income already filed to ascertain whether entry has been disclosed therein. The court finally observed that the conclusion of the AO is at best a reproduction of the conclusion in the investigation report which is a borrowed satisfaction and therefore the initiation of proceedings u/s 147/148 of the Act to re-open the assessments for the AYs in question does not satisfy the requirement of law.

d) In the case of South Yarra Holdings Vs ITO (supra), the Hon'ble Bombay High Court has held that it is a settled position in law that re-opening has to be done by the assessing officer on his own

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA satisfaction and it is not open to him to issue re-opening notice at the dictate of and/or satisfaction of some authority. Therefore on receipt of information which suggests the escapement of income, the assessing officer must examine the information in the context of the facts of the case and only on satisfaction leading to a reasonable belief that income has chargeable to tax has escaped assessment, a reopening notice is to be issued.

e) In all other decisions referred and relied upon by the Id AR the similar ratio has been laid”

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA jurisdictional and other High Courts. Therefore we hold the proceedings under 147 of the Act to be invalid and bad in law and is quashed.

11.Similarly Honble Tribunal in the case of Anil chothmalPatodia HUF, Vs NFAC Delhi [In ITA No. 4060/MUM/2023 for the A.Y. 2015-16] dated 30.04.2024 has dealt at Para 8 to 10 of the order read as under:

“8. We have heard rival submissions and perused the material on record for the reopening of the case. Now from the bare perusal of the ‘reasons recorded’ as incorporated supra, we find that first paragraph is about general finding of Kolkata Investigation Directorate in 84 penny stock companies and modus operandi. The second paragraph mentioned that assessee is one such person who has taken accommodation entry of bogus long term gain. However, there is no bogus long term gain in so far as on the scrip of EINS Edutech Ltd., which has been mentioned in the information. The ld. AO after receiving the information has not even applied his mind or has verified the records, whether assessee has claimed any kind of bogus long term capital gain in sale of shares of EINS Edutech Ltd., which is an allegation made in third para that assessee had obtained long term entry of bogus long term capital gain in trading of these shares. The assessee had duly disclosed the long term capital gain of Rs.1,18,39,977 on sale of different scrip, Bhageria Dye Chem Ltd altogether which is neither a penny stock nor any finding has been given by the ld. AO on this scrip. Thus, very premise on which ld. AO has assumed the jurisdiction and material information on record has no live link nexus with the income escaping assessment. The reasons mentions trading in EINS Edutech Ltd., for a consideration of Rs.3,35,51,000/- on which assessee has earned long term capital gain of Rs.1,18,39,977/- which has been claimed as exempt incomewhich fact itself is incorrect. Further, it has been brought on record that assessee has earned short term capital loss of Rs.1,52,500/- as these shares were purchased on 16/03/2015 & 17/03/2015 and were sold on 18/03/2015 & 19/03/2015. The said short term capital loss has not been set off against any income or has been carried forward by the assessee. So there

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA was no benefit to the assessee on this transaction which can lead to any inference that assessee must have engaged in some clandestine bogus entry for some benefit.

10 . In the result, appeal of the assessee is allowed on legal grounds”.

ITA.No.96/PAN/2024& ITA.No. 222/PAN/2025 NITIN TAMMANSA KATWA & RAVI TAMMANSA KATWA 13. In the result, the appeal filed by the assessee is allowed.

ITA.No222/PAN/2025.A.Y.2011-12.

Order pronounced in the open Court on 04th August, 2026.

Sd/- Sd/- MANISH BORAD PAVAN KUMAR GADALE (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Pune, Dated: 04th August, 2026 Abhishek Mohan Digitally signed by Abhishek Abhishek Mohan Mohan Date: 2026.08.05 12:08:44 +05'30' आदेश की प्रतितिति अग्रेतिि / Copy of the Order forwarded to : अिीिार्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. 4. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, “DB” बेंच, पणजी/ DR, ITAT, “DB” Bench, Panaji. गार्डफ़ाइि / Guard File. 5. //TRUE COPY// आदेशािुसार / BY ORDER,

Assistant Registrar, आयकर अिीिीय अतिकरण,/ ITAT, Panaji.