GAJANAN ENTERPRISES,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 17(1), MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI PAWAN SINGH (JUDICIAL MEMBER)

ITA No.3516, 3517, 3518 and 3519/MUM/2026 Assessment Year: 2013-14, 2015-16, 2015-16 and 2016-17

Gajanan Enterprises, 4th Floor, Deputy Commissioner of Income- Rustom Building, 29, Veer tax, Circle 17(1), Kautilya Nariman Road, Fort, Mumbai - Vs. Bhavan, BKC, Bandra (East), 400001, Maharashtra. Mumbai – 400051.

PAN NO. AAKFG 7595 A Appellant Respondent

Assessee by : Shri Jay N. Bhansali, Adv. a/w Ms. Slachi Jain, Adv. Revenue by : Shri Basavaraj Hiremath – CIT DR a/w Shri Rajgopal Parthasarathi – SR DR

Date of Hearing : 20/07/2026 Date of pronouncement : 30/07/2026

ORDER PER BENCH

These appeals by the assessee are directed against separate orders passed by the learned Commissioner of Income-Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short, ‘the Ld. CIT(A)’], for Assessment Years (in short ‘A.Y’), 2013-14 to 2016-17. In respect of Assessment Year 2015-16, two appeals have been

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preferred by the assessee, one arising from the order passed by the Assessing Officer under Section 143(3) of the Income-tax Act, 1961 (in short, "the Act"), and the second arising from the order passed under Section 147 read with Section 143(3) of the Act. As common issue(s) in dispute are involved in these appeals, the same were heard together and are disposed of by way of this consolidated order for the sake of convenience.

“1. Reopening proceedings are bad in law 1.1. The Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)) erred in upholding the action of the Assessing Officer (hereinafter referred to as "the AO") in reopening the case of the assessee vide notice dated 27.08.2022 under section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") is bad in law. The reasons given for doing so are wrong, contrary to facts of the case and against the provision of law; 1.2. The AO erred in reopening the case of assessee dehors any cogent material information to show that the income chargeable to tax has escaped assessment; 1.3. The CIT(A) / AO failed to appreciate that the notice dated 31.05.2022 under section 148A(b) of the Act, the order dated 26.08.2022 under section 148A(d) of the Act and the notice dated 27.08.2022 under section 148 of the Act was required to be issued/passed in a faceless manner in accordance with the e- Assessment of Income Escaping Assessment Scheme, 2022 prescribed under section 151A of the Act and therefore the said notices/ order issued/ passed by the Jurisdictional Assessing Officer are bad in law. Consequently, the reassessment order dated 26.05.2023 under section 147 read with section 144B of the Act (hereinafter referred to as "the impugned reassessment order') is liable to be quashed; 1.4. The CIT(A)/ AO failed to appreciate that the notice dated 15.04.2021 under section 148 of the Act, notice dated 31.05.2022 under section 148A(b) of the Act, notice 27.08.2022 under section 148 of the Act and the order dated 26.08.2022

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under section 148A(d) of the Act are time barred and therefore invalid. Consequently, the impugned reassessment order is liable to be quashed; 1.5. The CIT(A) / AO failed to appreciate that the notice dated 27.08.2022 under section 148 of the Act is non-est in as much as it has been issued without bearing a Documentation Identification Number in contravention to Circular No. 19 of 2019 dated 14th August 2019. Consequently, the impugned reassessment order is liable to be quashed; 1.6. The CIT(A)/ AO failed to appreciate that the order under section 148A(d) of the Act and notice under section 148 of the Act without providing a valid sanction are bad in law. The AO failed to appreciate that even if such sanction has been obtained, the same is mechanical in nature and therefore vitiated as no person properly instructed in law would sanction such reopening proceedings based on the existing material. Consequently, the impugned reassessment order is liable to be quashed; 1.7. The CIT(A)/ AO erred in upholding the impugned reassessment order confirming the addition with respect to other issues than those forming the basis of reasons for reopening. On this count itself, impugned reassessment order deserves to be quashed; 2. Addition under section 94(7) of the Act amounting to Rs. 10,74,141/- 2.1. The CIT(A) erred in confirming the action of the AO in taxing a sum of Rs. 10,74,141/- under section 94(7) of the Act on account of alleged dividend stripping. The reasons given are wrong, contrary to facts of the case and against the provision of law; 2.2. Without prejudice to the above, the CIT(A)/ AO ought to have restricted the disallowance under section 94(7) of the Act, if any, to Rs. 6,03,904/-being the dividend earned on scripts which have incurred losses and have been purchased/ sold 3 months prior/after to the record date; 3. Addition under section 37(1) of the Act amounting to Rs. 12,35,400/- 3.1. The CIT(A) erred in confirming the action of the AO in disallowing loss of Rs. 12,35,400/- incurred in derivative trading under section 37(1) of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law; 3.2. The CIT(A)/ AO erred in disregarding the documentary evidence provided by the assessee to prove the nature, source and genuineness of the loss and proceed to disallow the loss merely on surmises, conjectures and irrelevant uncorroborated material;

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3.3. The AO erred in relying on material / statements without providing an opportunity to rebut such material or cross examine the deponents whose statements are used against the assessee; 4. Addition under section 68 of the Act amounting to Rs. 40,85,480/-and disallowance of losses of Rs. 4,96,399/- under section 37(1) of the Act pertaining to the alleged penny scripts 4.1. The CIT(A) erred in upholding the action of the action of the AO in disallowing the loss of Rs. 4,96,399/- under section 37(1) of the Act and taxing sales value of Rs. 40,85,480/- of various scripts, alleged to be penny stocks, under section 68 of the Act. The reasons given are wrong. contrary to facts of the case and against the provision of law; 4.2. The CIT(A) erred in upholding the action of the AO in making the aforesaid addition even when the nature, source and genuineness of the transaction were explained and proved. The reasons given are in the realm of surmises and upon which no addition is sustainable; 4.3. The AO/CIT(A) failed to appreciate that the assessee has already offered the losses to tax as business income and taxing the same once again under section 68 of the Act has resulted in double taxation; 5. The CIT(A) erred in upholding the action of the AO in initiating penalty proceedings under section 271(1)(c) of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law; 6. The above grounds/sub grounds of appeal are without prejudice to each other;” 3. At the outset, the learned counsel for the assessee referred to Ground No. 1.7 of the appeal and submitted that, in the assessment order, the Assessing Officer has made additions in respect of issues other than those forming the basis of the reasons for reopening and, therefore, following the principle laid down by the Hon'ble Bombay High Court in the case of Jet Airways (India) Private Limited, (2011) 331 ITR 236 (Bom.), the reassessment order deserves to be quashed.

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4.1 In this regard, we note that the Coordinate Bench of the Tribunal in ITA No. 3431/Mum/2026 in the case of Chandrakant Mohambhai Patel referred to decision of the Hon'ble Bombay High Court in the case of Jet Airways (I) Ltd (supra) and observed that though the said decision was rendered under the unamended provisions of Section 148 of the Act, but under the amended provisions also ratio of said decision continues and the Assessing Officer can make additions on other issues ‘only if’ the addition has been made by the Assessing Officer on the issue of the reopening. The relevant finding of the Tribunal (supra) in said case is reproduced as under:

“ 6.1 The Finance Act, 2021 has substituted the entire reassessment framework by introducing Section 148A and substantially amending Sections 147 to 151 of the Act. Under the substituted regime, before issuing a notice under Section 148, the Assessing Officer is statutorily obliged to identify the "information which suggests that income chargeable to tax has escaped assessment", furnish such information to the assessee by issuing a notice under Section 148A(b), consider the reply filed by the assessee, and thereafter pass a reasoned order under Section 148A(d) determining whether it is a fit case for issuance of notice under Section 148. Thus, unlike the erstwhile provisions, the jurisdiction to reopen an assessment is no longer founded merely upon the uncommunicated subjective

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satisfaction of the Assessing Officer. The jurisdictional foundation now rests upon the specific information disclosed to the assessee, who is afforded a statutory opportunity to rebut the same before issuance of notice under Section 148. The legislative scheme, therefore, clearly manifests that the reassessment proceedings originate from and remain anchored to the information communicated under Section 148A(b). Consequently, the validity of the reassessment necessarily depends upon the survival of the very foundation on which jurisdiction was assumed.

6.2 In the present case, the notice issued under Section 148A(b), read with the order passed under Section 148A(d), reveals that the reassessment was proposed on account of the following information: (i) cash deposits in bank account; (ii) cash withdrawals; (iii) turnover reported in GST returns; (iv) TDS information; (v) depository transactions; and (vi) other information available through the Insight Portal. Significantly, the alleged unsecured loan of Rs.15,00,000 received from M/s. Vavya Enterprises, which ultimately formed the sole basis of addition under Section 68, does not find mention either in the notice issued under Section 148A(b) or in the order passed under Section 148A(d). Equally significant is the fact that while completing the reassessment under Section 147 read with Section 144B, the Assessing Officer has not made any addition whatsoever in respect of any of the issues forming the very basis of reopening. The only addition made is under Section 68 in respect of the unsecured loan received from M/s. Vavya Enterprises, which is admittedly an altogether distinct issue.

6.3 The issue is no longer res integra. The Hon'ble Bombay High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.) held that the expression "and also any other income" occurring in Section 147 cannot be read in isolation. The Hon'ble Court held that the Assessing Officer must first assess or reassess the income which formed the basis of the reasons recorded for reopening. It is only thereafter that he acquires jurisdiction to assess any other income which may come to his notice during the reassessment proceedings. The Hon'ble jurisdictional High Court further held that where the Assessing Officer ultimately does not assess the income which constituted the basis for reopening, the reassessment cannot be sustained merely for making additions on other issues discovered subsequently. In other words, the jurisdiction to assess "any other income" is merely incidental and supplemental to the jurisdiction validly exercised in respect of the income for which the assessment was reopened.

6.4 Although the present reassessment is governed by the substituted provisions introduced by the Finance Act, 2021, we are of the considered view that the ratio laid down in Jet Airways (India) Ltd. (supra) continues to hold the field. In fact, the substituted statutory framework reinforces, rather than dilutes, the principle laid down therein. Section 148A(b) mandates disclosure of the information suggesting escapement of income, while Section 148A(d) requires the Assessing Officer to record satisfaction with respect to such information before assuming jurisdiction under Section 148. Therefore, the jurisdiction itself is founded upon the

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specific information disclosed to the assessee. Where, ultimately, no addition is made on the very issue constituting the basis for assumption of jurisdiction, the substratum of the reassessment disappears. In such circumstances, permitting the Assessing Officer to sustain the reassessment solely for making an addition on an altogether unrelated issue would render the statutory safeguards introduced by Parliament under Section 148A wholly nugatory.

6.5 The Finance Act, 2021 has undoubtedly altered the procedural framework governing reassessment. However, the amendments merely strengthen the procedural safeguards available to the assessee by introducing a pre-notice enquiry under Section 148A. They do not enlarge the substantive jurisdiction of the Assessing Officer to assess issues wholly unconnected with the information forming the basis of reopening. Significantly, Parliament has not altered the substantive language of Section 147 in so far as it empowers the Assessing Officer to assess or reassess the escaped income and "also any other income" which comes to his notice during the course of reassessment proceedings. The expression "and also", which formed the foundation of the interpretation adopted by the Hon'ble Bombay High Court in Jet Airways (India) Ltd. (supra), remains unchanged. It is a settled principle of statutory interpretation that where Parliament retains the same statutory language despite being aware of the judicial interpretation placed thereon, such interpretation must ordinarily be regarded as having received legislative approval.

6.6 Indeed, under the substituted regime, the jurisdictional foundation is even more clearly defined. Under the erstwhile provisions, the reassessment was founded upon the "reasons to believe" recorded by the Assessing Officer. Under the substituted provisions, the jurisdiction is founded upon the "information suggesting escapement of income" disclosed under Section 148A(b) and accepted in the order passed under Section 148A(d). Thus, although the form has changed, the jurisdictional foundation remains the same, namely, the existence of identified information indicating escapement of income. Consequently, where the Assessing Officer ultimately accepts, either expressly or by necessary implication, that no addition is warranted on the very issue forming the foundation of reopening, the reassessment loses its jurisdictional basis. Once the jurisdictional foundation fails, the consequential exercise of jurisdiction in respect of other independent issues cannot survive.

6.7 Any other interpretation would defeat the very object underlying the introduction of Section 148A. Parliament consciously introduced a pre-notice adjudicatory mechanism to ensure that reassessment proceedings are founded upon specific, tangible and disclosed information. If, after invoking jurisdiction on one set of information, the Assessing Officer is permitted to abandon that very foundation and sustain the reassessment solely on an altogether different issue discovered subsequently, the safeguards consciously incorporated by Parliament would become illusory. Such an interpretation would not only frustrate the legislative intent underlying the Finance Act, 2021 but would also permit

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reassessment proceedings to travel beyond the jurisdictional foundation on which they were initiated.

6.8 We also find that the Coordinate Bench of the Tribunal in Milan Agency v. ITO, ITA No. 5414/Mum/2024, after considering the substituted reassessment provisions and following the binding judgment of the Hon'ble Bombay High Court in Jet Airways (India) Ltd. (supra), held that where no addition is made on the issue for which the reassessment proceedings were initiated, the Assessing Officer lacks jurisdiction to make additions on any other issue. The relevant finding of the Tribunal is reproduced as under:- “7. Before us, the ld. Counsel in respect of additional ground filed vehemently contended that no addition has been made on the issues raised in the reason provided in the notice issued u/s 148A(b) of the Act. He further made reliance on the decision of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 336 (Bombay). The ld. Counsel also filed paper book comprising copies of details and submission filed before the lower authorities. He submitted that as per accounting standard, the assessee was following an exclusive system and accordingly VAT collection and VAT liability and payment was accounted separately and was not formed part of P&L A/c and the lower authorities has not disputed the details and documentary evidences furnished. 8. On the other hand Id. DR supported the order of lower authorities. 9 Heard both the sides and perused the material on record. The case of the assessee was reopened on the basis of information from the CGST Authorities that M/s. Germanium Trading Pvt. Ltd. and M/s. Cannonball Trading Pvt. Ltd. have issued bogus invoices and the assessee has received such bogus invoices. The assessee was asked to submit the detail in respect of bogus invoices of Rs. 1,07,68,326/- received from the above entities and was also asked to show cause and explain by such bogus invoices of Rs. 1,07,68,328/- shall not be treated as unexplained money u/s 69 of the Act. However, the AO has not made any discussion verification and examination of this issue in the assessment order. On the other hand, the AO has made addition of Rs. 2,84,16,279/-on account of recalculation of the net profit on the basis of party wise sale amount of Rs. 36,24,13,765/- furnished by the assessee and purchase amount of Rs. 32,77,88,333/- shown n the trading account of the assesscc. It is noticed that without any reason the AO has ignored the corresponding party wise purchase amount of Rs. 34,89,13,119/- to the party wise sale and also not considered the sale amount of Rs. 33,24,60,256/- shown in the trading account. The AO has also not controverted the relevant material submitted during the course of assessment proceedings that the VAT paid on purchases as well as VAT collected on sales was separately accounted and not passed through P&L account. In respect of additional ground of appeal on the validity of order passed u/s 147 r.w.s. 144B of the Act, we have perused the the decision of Hon'ble Jurisdictional High Court in the case of Jet Airways (1) Ltd., 331 ITR 236 (Bombay) 2010 wherein held that effect of

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section 147 is that the AO has to assess or reassess such income that has escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. Since in the case of the assessee the AO had not made addition on the issue of bogus invoices as alleged to be obtained from M/s. Cannonball Trading Pvt. Ltd. and M/s. Germanium Trading Pvt. Ltd. on the basis of which the case was reopened as escaped assessment therefore following the decision of Hon'ble Jurisdiction as discussed supra, the AO is not justified in making the other addition as discussed above in this order.”

6.9 Accordingly, respectfully following the binding decision of the Hon'ble jurisdictional High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.), whose ratio, in our considered opinion, continues to govern reassessment proceedings even under the substituted statutory regime, we hold that the reassessment framed in the present case is without jurisdiction and is liable to be quashed.”

4.2 In the instant case, an order under Section 148A(d) was passed wherein the Assessing Officer recorded the finding of escaped income as under:-

“4.8 Thus, the objections raised are dealt with hereinabove. The submissions of the assessee are not acceptable on merits. Therefore, it is clear from above mentioned facts that transactions mentioned at para 4.1 and para 4.2 has escaped assessment. 5. From the above mentioned facts, it is clearly visible that the Assessee has sold the shares of script Frontline Business amounting to Rs.72, 15, 781/-, payment of which has been credited to the Bank account of the Assessee. As, the above-mentioned accommodation entries were clearly deposited in bank accounts of Assessee, I am of the opinion that the above amount covered under the definition of “Asset” as appearing in the explanation to section 149(1) of the Act.” 4.3 But in the impugned assessment order, the Assessing Officer has made additions in respect of three issues. Firstly, addition under Section 94(7) of the Act for disallowance of the short-term capital loss on the scrips where dividend income has been earned; Secondly, disallowance of future and options losses amounting to

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Rs.12,35,400/- under Section 37(1) of the Act; thirdly, he made disallowance of loss in share trading of Rs.4,96,399/- and made an addition under Section 68 amounting to Rs.40,85,480/- in respect of sale of shares.

4.4 Before us, the learned counsel for the assessee contended that no addition has been made on the issue of the reopening, which was in relation to sale of the shares of Frontline Business amounting to ₹17,15,788/-. The learned DR could not controvert the above factual finding. Thus, evidently, the Assessing Officer has not made any addition in respect of the issue on which the assessment was reopened.

4.5 Therefore, respectfully following the ratio laid down by the Hon'ble Bombay High Court in the case of Jet Airways (India) Private Limited, the reassessment proceedings are, therefore, quashed. Since we have annulled the reassessment proceedings on the jurisdictional issue itself, adjudication of the remaining grounds relating challenging validity of reassessment and other grounds raised on merits of addition would be rendered merely academic. It is a settled proposition that once the assessment itself is held to be void, the Tribunal is not required to examine the merits of the additions. We, therefore, refrain from adjudicating the remaining grounds, leaving them open.

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“1. Reopening proceedings are bad in law 1.1. The Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)) erred in upholding the action of the Assessing Officer (hereinafter referred to as "the AO") in reopening the case of the assessee vide notice dated 27.08.2022 under section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") is bad in law. The reasons given for doing so are wrong, contrary to facts of the case and against the provision of law; 1.2. The CIT(A) erred in upholding the action of the AO in reopening the case of assessee dehors any cogent material / information to show that the income chargeable to tax has escaped assessment; 1.3. The CIT(A) / AO failed to appreciate that the notice dated 24.05.2022 under section 148A(b) of the Act, the order dated 26.08.2022 under section 148A(d) of the Act and the notice dated 27.08.2022 under section 148 of the Act was required to be issued/passed in a faceless manner in accordance with the e- Assessment of Income Escaping Assessment Scheme, 2022 prescribed under section 151A of the Act and therefore the said notices/ order issued/passed by the Jurisdictional Assessing Officer are bad in law. Consequently, the reassessment order dated 30.05.2023 under section 147 read with section 144B of the Act (hereinafter referred to as "the impugned reassessment order') is liable to be quashed; 1.4. The CIT(A)/ AO failed to appreciate that the notice dated 15.04.2021 under section 148 of the Act, notice dated 25.05.2022 under section. 148A(b) of the Act, notice 27.08.2022 under section 148 of the Act and the order dated 26.08.2022 under section 148A(d) of the Act are time barred and therefore invalid. Consequently, the impugned reassessment order is liable to be quashed; 1.5. The CIT(A)/ AO failed to appreciate that the reopening proceedings are merely on the basis of change of opinion, which is impermissible under the law. Consequently, the impugned reassessment order is liable to be quashed; 1.6. The CIT(A) / AO failed to appreciate that the notice dated 27.08.2022 under section 148 of the Act is non-est in as much as it has been issued without bearing a Documentation Identification Number in contravention to Circular No. 19 of 2019 dated 14th August 2019. Consequently, the impugned reassessment order is liable to be quashed; 1.7. The CIT(A)/ AO failed to appreciate that the order under section 148A(d) of the Act and notice under section 148 of the Act without providing a valid sanction

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are bad in law. The AO failed to appreciate that even if such sanction has been obtained, the same is mechanical in nature and therefore vitiated as no person properly instructed in law would sanction such reopening proceedings based on the existing material. Consequently, the impugned reassessment order is liable to be quashed; 2. Disallowance of losses of Rs. 17,26,63,949/- pertaining to trading in futures & options on BSE platform 2.1. The CIT(A) erred in upholding the action of the AO in disallowing the loss of Rs. 17,26,63,949/- incurred from trading in futures & options on BSE. The reasons given are wrong, contrary to facts of the case and against the provision of law; 2.2. The CIT(A) erred in upholding the action of the AO in making the aforesaid addition even when the nature, source and genuineness of the transaction were explained and proved. The reasons given are in the realm of surmises and conjectures upon which no addition is sustainable; 2.3. The AO erred in relying on material / statements without providing an opportunity to rebut such material or cross examine the deponents whose statements are used against the assessee; 2.4. The AO/CIT(A) failed to appreciate that the assessee has already offered the losses to tax as business income and taxing the same once again has resulted in double taxation; 3. The CIT(A) erred in upholding the action of the AO in initiating penalty proceedings under section 271(1)(c) of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law; 4. The above grounds/sub grounds of appeal are without prejudice to each other;” 6. Before us, the learned counsel for the assessee submitted that in the case, notice was issued under the unamended provisions of Section 148 on 15.04.2021 and thereafter, in view of the decision of the Hon'ble Supreme Court in the case of Union of India & Ors. v. Ashish Agarwal (2023) 454 ITR 1 (SC), said notice was considered as a notice under the new provisions of Section 148A(b), and thereafter the procedure was followed under new amended

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provisions of Section 148. The learned counsel submitted that, as far as reopening of the assessment for Assessment Year 2015-16 under the old provisions is concerned, in the case of Union of India v. Rajeev Bansal (2024) 469 ITR 46 (SC) the learned Additional Solicitor General conceded before the Hon’ble Supreme Court that the notice for Assessment Year 2015-16 was not time barred and, therefore, the provisions of TOLA were not applicable. The Hon'ble Court held that notice for Assessment Year 2015-16 could have been issued only up to 31st March, 2022 and therefore, under the amended provisions, any notice issued beyond that period would be barred by limitation.

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7.1 The controversy before us is whether such notices issued for AY 2015-16 are within limitation period. This controversy, however, now stands concluded by the subsequent decision of the Hon'ble Supreme Court in Rajeev Bansal (supra). While examining the scope and effect of the directions issued in Ashish Agarwal (supra), the Hon'ble Supreme Court held that those directions did not enlarge or extend the period of limitation prescribed under the substituted provisions of sections 147 to 151. Insofar as Assessment Year 2015-16 is concerned, the Hon'ble Court, recording the concession of the learned Additional Solicitor General that the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) had no application, held that a valid notice could have been issued only up to 31.03.2022 and any notice issued thereafter would be barred by limitation.

7.2 In the present case, the notice under the amended provisions of section 148 has admittedly been issued on 21.08.2022, i.e., well beyond 31.03.2022. Applying the ratio laid down by the Hon'ble Supreme Court in Rajeev Bansal (supra), the impugned notice is clearly barred by limitation. Since the very assumption of jurisdiction under section 148 is invalid, the consequential reassessment order cannot be sustained and is accordingly quashed. The remaining grounds, being rendered merely academic, do not call for adjudication.

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“1. Reopening proceedings are bad in law 1.1. The Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)) erred in upholding the action of the Assessing Officer (hereinafter referred to as "the AO") in reopening the case of the assessee vide notice dated 23.08.2022 under section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") is bad in law. The reasons given for doing so are wrong, contrary to facts of the case and against the provision of law; 1.2. The AO erred in reopening the case of assessee dehors any cogent material/information to show this the income chargeable to tax has escaped assessment; 1.3. The CIT(A)/AO failed to appreciate that the notice dated 24.05.2022 under section 148A(b) of the Act, the order dated 19.08.2022 under section 148A(d) of the Act and the notice dated 23.08.2022 under section 148 of the Act was required to be issued/ passed in a faceless manner in accordance with the e- Assessment of Income Escaping Assessment Scheme, 2022 prescribed under section 151A of the Act and therefore the said notices/ order issued/passed by the Jurisdictional Assessing Officer are bad in law. Consequently, the reassessment order dated 26.05.2023 under section 147 read with section 144B of the Act (hereinafter referred to as "the impugned reassessment order') is liable to be quashed; 1.4. The CIT(A)/ AO failed to appreciate that the notice dated 30.06.2021 under section 148 of the Act, notice dated 24.05.2022 under section 148A(b) of the Act, notice 23.08.2022 under section 148 of the Act and [7:54 AM, 7/30/2026] Bunty: the order dated 19.08.2022 under section 148A(d) of the Act are time barred and therefore invalid. Consequently, the impugned reassessment order is liable to be quashed; 1.5. The CIT(A)/AO failed to appreciate that the notice dated 23.08.2022 under section 148 of the Act is non-est in as much as it has been issued without bearing a Documentation Identification Number in contravention to Circular No. 19 of 2019 dated 14th August 2019. Consequently, the impugned reassessment order is liable to be quashed; 1.6. The CIT(A)/AO failed to appreciate that the order under section 148A(d) of the Act and notice under section 148 of the Act without providing a valid sanction are bad in law. The AO failed to appreciate that even if such sanction has been

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obtained, the same is mechanical in nature and therefore vitiated as no person properly instructed in law would sanction such reopening proceedings based on the existing material. Consequently, the impugned reassessment order is liable to be quashed; 1.7. The CIT(A)/ AO failed to appreciate that order dated 19.08.2022 under section 148A(d) of the Act and notice dated 23.08.2022 under section 148 of the Act passed/ issued with the purported sanction of Principal Commissioner of Income-tax, Mumbai 6 instead of Principal Chief Commissioner of Income-tax is wrong and contrary to provisions under section 151 of the Act. Consequently, the impugned reassessment order is liable to be quashed; 2. Addition under section 68 of the Act amounting to Rs. 56,77,747/-pertaining to the alleged penny scripts 2.1. The CIT(A) erred in upholding the action of the AO in making addition of Rs. 56,77,747/- alleged to be penny stocks, under section 68 of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law; 2.2. The CIT(A) erred in upholding the action of the AO in making the aforesaid addition even when the nature, source and genuineness of the transaction were explained and proved. The reasons given are in the realm of surmises and upon which no addition is sustainable; 2.3. The AO/CIT(A) erred in relying on unrelated data and uncorroborated material without giving an opportunity to the assessee to rebut the same; 2.4. The AO/CIT(A) failed to appreciate that the assessee has already offered the losses to tax as business income and taxing the saine once again under section 68 of the Act has resulted in double taxation; 3. The CIT(A) erred in upholding the action of the AO in initiating penalty proceedings under section 271(1)(c) of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law; 4. The above grounds/sub grounds of appeal are without prejudice to each other;”

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invalid being beyond limitation period. The Ld. Counsel for the assessee drawn our attention to the notice u/s 148 issued on 30.06.2021 under the unamended law. In the case of the assessee the notice u/s 148A(b) was issued on 24.05.2022 against which objections were filed by the assessee on 13.06.2022 and thus time limit for issue of the notice u/s 148 under the amended provisions was available up to 15 days from the filing of the reply which would expire on or before the end of the 30.06.2022. Since there was only one day of the survival period was available if taking into consideration the notice u/s 48 could be issued only upto 30.06.2022, whereas in the case notice has been issued on 30.08.2022 which is evidently beyond the limitation period and therefore reassessment proceedings are liable to be quashed.

10.1 The Hon'ble Supreme Court in Rajeev Bansal (supra), while explaining the effect of its decision in Ashish Agarwal, has held that the Revenue does not get a fresh period of limitation for issuance of

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notice under section 148. The Assessing Officer is entitled only to the balance or "survival period" of limitation available under the substituted provisions, and such survival period becomes available only after excluding the period consumed by the assessee in submitting its reply to the notice issued under section 148A(b).

10.2 In the present case, the period from 24.05.2022, being the date of issuance of notice under section 148A(b), till 13.06.2022, being the date on which the assessee furnished its reply, stood excluded. Thereafter, the Assessing Officer could avail only the surviving period of limitation, which, on the admitted facts, was merely one day. Consequently, the outer limit for issuance of notice under section 148 expired accordingly upto 14/06/2022. Admittedly, however, the impugned notice under section 148 was issued only on 30.08.2022. The notice, therefore, falls beyond the permissible survival period as explained by the Hon'ble Supreme Court in Rajeev Bansal (supra) and is consequently barred by limitation. Since the very assumption of jurisdiction is invalid, the consequential reassessment proceedings cannot be sustained and are accordingly quashed.

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12.1 The Assessing Officer, relying principally upon the investigation conducted by the Directorate of Investigation, Kolkata, and certain interim findings recorded by SEBI in respect of alleged penny stock companies, held that the transactions undertaken by the assessee in certain scrips formed part of an accommodation entry mechanism designed to generate artificial losses. According to

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the Assessing Officer, the impugned trades lacked commercial substance and were executed pursuant to a pre-arranged arrangement between operators and beneficiaries. On the said premise, the business loss claimed by the assessee amounting to ₹66,91,363/- was treated as non-genuine and disallowed.

12.2 Before the learned CIT(A), the assessee submitted that it was a regular trader in shares and securities and had carried out transactions in as many as 2,378 scrips during the relevant previous year through the electronic trading platform of recognized stock exchanges. It was pointed out that the impugned transactions related only to 42 scrips, constituting an insignificant fraction of the overall trading activity, and that the resultant income had throughout been offered under the head "Profits and Gains of Business or Profession" and not as exempt long-term capital gains. It was further contended that all transactions were supported by contract notes, demat statements and bank records; no material had been brought on record to establish any nexus with the alleged operators identified by the Investigation Wing; neither the investigation report nor the statements relied upon were furnished to the assessee; and the addition had been made solely on general observations contained in the investigation report. Reliance was placed, inter-alia, on PCIT v. Krishna Devi [(2021) 431 ITR 361 (Delhi)], ITO v. Smt. Geeta Khare [ITA No. 2145/Kol/2018, order dated 29.10.2019 (ITAT Kolkata)] and CIT v. Fair Finvest Ltd.

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[(2013) 357 ITR 146 (Delhi)] to contend that an investigation report, without independent corroboration connecting the assessee with the alleged accommodation entry providers, cannot constitute sufficient evidence for making an addition.

12.3 The learned CIT(A), however, affirmed the assessment order holding that the investigation carried out by the Directorate of Investigation and the findings recorded by SEBI sufficiently established a systematic modus operandi adopted in penny stock transactions. Applying the test of human probabilities laid down in CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)] and McDowell & Co. Ltd. v. CTO [(1985) 154 ITR 148 (SC)], the learned CIT(A) concluded that the transactions lacked commercial substance and upheld the disallowance.

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investigation report. No statement implicating the assessee has been brought on record; no opportunity of cross-examination was afforded; nor has any evidence been produced to establish any flow of unaccounted money from or to the assessee.

13.1 It is an admitted position that the assessee is a regular trader in shares and securities and that the impugned transactions were executed through the electronic trading mechanism of recognized stock exchanges, supported by contract notes, demat records and banking channels. The Revenue has not disputed the execution of these transactions on the stock exchange nor has it brought any material to establish that the documentary evidence produced by the assessee is fabricated or sham. Merely because certain scrips subsequently came under investigation or were identified by SEBI as manipulated, it cannot ipso facto lead to the conclusion that every person transacting therein was a participant in the alleged manipulation. Suspicion, however strong, cannot substitute legal proof.

13.2 The ratio laid down by the Hon'ble Delhi High Court in PCIT v. Krishna Devi (supra) , which has been relied upon by the assessee before ld CIT(A), squarely applies, wherein it was held that the investigation report, in the absence of independent corroborative material linking the assessee with the alleged accommodation entry operators, cannot by itself justify an adverse inference. The same

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principle has consistently been reiterated that additions cannot be sustained merely on generalized investigation reports without establishing the assessee's involvement through cogent evidence.

13.3 In the present case, the Revenue has failed to discharge the initial burden of proving that the impugned transactions were sham or that the assessee was a party to the alleged accommodation entry arrangement. Consequently, the principles enunciated in Durga Prasad More (supra), Sumati Dayal (supra) and McDowell & Co. Ltd. (supra), which undoubtedly permit the authorities to look beyond the apparent where surrounding circumstances so warrant, cannot be invoked in the absence of any material connecting the assessee with the alleged fraudulent scheme. Those decisions do not dispense with the requirement of establishing a factual nexus between the assessee and the alleged accommodation entry operators.

13.4 Accordingly, we are unable to sustain the findings recorded by the authorities below. The disallowance of business loss amounting to ₹66,91,363/- is directed to be deleted. The grounds raised by the assessee are, therefore, allowed.

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Order pronounced in the open Court on 30/07/2026.

Sd/- Sd/- (PAWAN SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/07/2026 M. Ranganath Vittal , Sr. P.S. Copy of the Order forwarded to :

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai