MR. OMPRAKASH BHADADA ,MUMBAI vs. PR. CIT 27 , MUMBAI

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal by the assessee is directed against the revisional order dated 30.10.2025 passed by the learned Principal Commissioner of Income-tax, Mumbai-27 [hereinafter referred to as "the PCIT"], under section 263 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"], for the assessment year 2014- 15.

2 ITA No. 8829/Mum/2025 Omprakash Bhadada

Facts in brief

2.1 The information on the basis of which the reassessment proceedings were initiated had originated from a search and survey action conducted on 19.03.2019 by DDIT (Investigation), Units 7(1) and 7(3), Mumbai, in the case of a syndicate allegedly led by Shri Naresh Jain. According to the information, Shri Naresh Jain and his associates were engaged in providing accommodation entries in the form of bogus long-term capital gains, short-term capital gains and losses in several scrips to beneficiaries across the country. The investigation was stated to have revealed a network comprising operators, beneficiaries, intermediaries, exit providers, share-broking firms, hawala operators and jama-kharchi companies. M/s Nyssa Corporation Ltd. was identified as one of the penny-stock scrips whose prices had allegedly been

3 ITA No. 8829/Mum/2025 Omprakash Bhadada manipulated for providing accommodation entries. The assessee was identified as a beneficiary of an alleged accommodation entry of Rs.54,30,628/- through the aforesaid scrip.

2.3 During the reassessment proceedings, the Assessing Officer issued a notice under section 143(2) dated 02.01.2023 and notices under section 142(1) dated 13.01.2023, 09.02.2023, 10.03.2023 and 21.04.2023. The assessee was required to furnish, inter alia, the particulars of his business activities; details and statements of the bank accounts; audited financial statements and computation of income; demat account statements; contract notes; the broker’s ledger account; dates, quantity and consideration relating to the purchase and sale of the shares of M/s Nyssa Corporation Ltd.; the bank account through which the purchase consideration was paid and the sale proceeds were received; and the computation of the long-term capital gain.

2.4 The assessee was also required to explain the basis upon which he had selected the shares of M/s Nyssa Corporation Ltd. for investment, his knowledge and experience in share trading, his knowledge of the business and financial position of the company, the manner in which the purchase and sale orders were placed, the particulars of the broker, the rationale for purchasing and selling the shares and the details of any other share transactions undertaken in the preceding and succeeding financial years.

4 ITA No. 8829/Mum/2025 Omprakash Bhadada 2.5 In response to the notices, the assessee initially sought adjournments on the ground that the information was under preparation and subsequently on medical grounds. In the reply dated 15.03.2023, the assessee explained that he was engaged in wholesale and retail trading business under the name of M/s Saurabh Chains. The assessee furnished a copy of his bank statement, audited balance sheet, profit and loss account and computation of income. In support of the transaction in the shares of M/s Nyssa Corporation Ltd., formerly known as Ravinay Trading Company Ltd., the assessee furnished the contract notes and a copy of the ledger account appearing in the books of the registered broker, M/s Consortium Securities Pvt. Ltd.

2.6 The material placed before the Assessing Officer showed that the assessee had originally purchased 3,998 shares of Ravinay Trading Company Ltd. on 10.08.2012 for a consideration of Rs.7,30,500/-. Upon a split, the original holding of 3,998 shares became 39,980 shares. The assessee sold 15,000 shares on 09.10.2013, 22,000 shares on 11.10.2013, another 2,384 shares on 11.10.2013 and the remaining 596 shares on 14.10.2013. Thus, the entire holding of 39,980 shares was sold within a period of about one week. The sale consideration was recorded by the Assessing Officer at different places as Rs.54,24,172/- and Rs.54,24,672/-, whereas the long-term capital gain claimed as exempt was consistently recorded at Rs.46,94,172/-.

5 ITA No. 8829/Mum/2025 Omprakash Bhadada 2.7 The assessee maintained that the purchase and sale of the shares were supported by the contract notes, the broker’s ledger account, the demat account and the relevant bank statements. The sale proceeds were received through normal banking channels from the registered broker and the shares were sold in dematerialised form through the recognised stock exchange. The assessee, therefore, claimed that the long-term capital gain arising on the sale of the listed shares was eligible for exemption under section 10(38) of the Act.

2.8 The Assessing Officer, however, observed that the assessee was neither a regular share trader nor an investor and that he had not furnished complete particulars concerning his knowledge, expertise or experience in share trading. The assessee had also not furnished a satisfactory explanation as to how he had identified M/s Nyssa Corporation Ltd. for investment or what analysis of the business, financial position and prospects of the company had been undertaken before making the investment. The Assessing Officer further observed that the assessee had not furnished details of investments made in shares or securities either before or after the year under consideration.

2.9 The Assessing Officer noted that all the shares had been purchased on a single date, namely, 10.08.2012, for Rs.7,30,500/, and that within a period of just over one year the assessee had received sale consideration of approximately Rs.54,24,000/-. The Assessing Officer computed the increase in the value of the

6 ITA No. 8829/Mum/2025 Omprakash Bhadada investment at 642.5 per cent and observed that such an astronomical return had been earned despite the assessee not possessing the requisite knowledge, expertise or experience in share trading. The Assessing Officer inferred that the investment in the shares of M/s Nyssa Corporation Ltd. was a one-time transaction undertaken for introducing unaccounted money in the guise of exempt long-term capital gain.

3.1 The Assessing Officer held that the assessee had failed to prove the genuineness, credibility and authenticity of the transaction entered into during the year under consideration. He further held that the assessee had failed to furnish complete and satisfactory replies to the questionnaires and had not produced documentary evidence establishing that the purchase and sale of

7 ITA No. 8829/Mum/2025 Omprakash Bhadada the shares of M/s Nyssa Corporation Ltd. had been undertaken with a genuine intention of earning profit.

3.2 The Assessing Officer, accordingly, treated the long-term capital gain of Rs.46,94,172/- claimed as exempt under section 10(38) of the Act as non-genuine and unexplained and added the same to the income of the assessee. The returned income of Rs.11,13,160/- was consequently assessed at Rs.58,07,332/-. The assessment was completed on 12.05.2023 under section 147 read with section 144B of the Act. Penalty proceedings under section 271(1)(c) of the Act were also initiated separately. Aggrieved by the addition of Rs.46,94,172/-, the assessee filed an appeal before the learned CIT(A) on 27.05.2023.

3.3 Subsequently, the assessment records were examined by the learned PCIT and revision proceedings under section 263 of the Act were instituted on 25.04.2025. A show-cause notice dated 30.06.2025 was issued to the assessee, fixing the hearing on 14.07.2025. In the said notice, the learned PCIT observed that the Assessing Officer, after treating the transaction as sham and non- genuine, had added only the long-term capital gain of Rs.46,94,172/-. According to the learned PCIT, once the transaction was held to be a sham transaction used as a conduit to introduce unaccounted money into the books of account, the Assessing Officer ought to have brought the entire sale proceeds of Rs.54,24,172/- to tax.

8 ITA No. 8829/Mum/2025 Omprakash Bhadada 3.4 In response to the show-cause notice, the assessee submitted that the issue concerning the purchase and sale of the shares of M/s Nyssa Corporation Ltd. had been specifically examined by the Assessing Officer during the reassessment proceedings. The Assessing Officer had called for detailed information, examined the supporting evidence and, after being dissatisfied with the assessee’s explanation, treated the long-term capital gain as non- genuine and denied the exemption under section 10(38) of the Act. The assessee submitted that the shares had been purchased in the preceding year for Rs.7,30,500/- and were duly recorded in the books of account. There was no material to show that the purchase of the shares was not genuine. The shares had subsequently been sold through a registered broker on a recognised stock exchange to a purchaser whose identity was not known to the assessee because the transaction had taken place electronically. The sale was supported by contract notes and sale bills, securities transaction tax had been paid, the shares had been delivered through the demat account and the sale proceeds had been received through account-payee cheques from the registered broker and were duly reflected in the bank statement.

3.5 The assessee contended that all the material facts concerning the purchase and sale of the shares were before the Assessing Officer. After considering the said material, the Assessing Officer allowed the cost of acquisition of Rs.7,30,500/- and added only the net long-term capital gain of Rs.46,94,172/-. The proposed revision under section 263, therefore, sought to deny the cost of

9 ITA No. 8829/Mum/2025 Omprakash Bhadada acquisition and to substitute the view of the learned PCIT for the view already taken by the Assessing Officer. It was submitted that the Assessing Officer had conducted adequate enquiry and verification and had adopted one of the legally permissible views. The assessment order could, therefore, neither be regarded as erroneous nor as prejudicial to the interests of the Revenue merely on the basis of a different opinion entertained by the learned PCIT. The assessee further submitted that an appeal against the addition of Rs.46,94,172/- had already been filed before the learned CIT(A) on 27.05.2023 and was pending for adjudication. According to the assessee, when the larger issue concerning the taxability of the alleged bogus long-term capital gain was pending before the learned CIT(A), jurisdiction under section 263 could not be assumed in respect of the smaller or consequential issue relating to the cost of acquisition of Rs.7,30,500/-.

3.6 By a further written submission dated 23.07.2025, the assessee contended that the proposal for revision was founded upon an audit objection and that no independent enquiry had been conducted by the learned PCIT before issuance of the show-cause notice. It was submitted that the Assessing Officer had taken a possible view on the basis of the facts and material available during the reassessment proceedings and that such a view was sought to be substituted by the view of the audit officer through the exercise of jurisdiction under section 263. The assessee, therefore, requested that the revisional proceedings be dropped.

10 ITA No. 8829/Mum/2025 Omprakash Bhadada 3.7 The learned PCIT did not accept the submissions of the assessee. On examining the reassessment record, the learned PCIT observed that sale proceeds of Rs.54,24,172/- had been credited to the bank account of the assessee. According to the learned PCIT, both the investigation report and the findings recorded in the reassessment order established that the entire transaction was a sham transaction used as a conduit for converting unaccounted money into accounted money.

3.8 The learned PCIT observed that the Assessing Officer had himself recorded that, by following the alleged pattern and modus operandi of the penny-stock company, the assessee had undertaken transactions of Rs.54,24,172/- in the shares of M/s Nyssa Corporation Ltd. for routing his unaccounted money through the purchase and sale of shares. The Assessing Officer had also held that the assessee had failed to establish the genuineness, credibility and authenticity of the transaction. However, notwithstanding those findings, the Assessing Officer had restricted the addition to the long-term capital gain of Rs.46,94,172/- instead of bringing the entire sale proceeds of Rs.54,24,172/- to tax.

3.9 The learned PCIT held that the conclusion of the Assessing Officer to add only the long-term capital gain was inconsistent with his own finding that the entire transaction was sham and bogus. According to the learned PCIT, the Assessing Officer had failed to examine the issue in the correct perspective and had not applied

11 ITA No. 8829/Mum/2025 Omprakash Bhadada his mind while restricting the addition to Rs.46,94,172/-. The learned PCIT computed the consequent underassessment and loss of revenue at Rs.7,30,000/-, being the difference between Rs.54,24,172/- and Rs.46,94,172/-. The learned PCIT observed that the Assessing Officer had effectively allowed relief of Rs.7,30,000/- without proper enquiry and verification. It may be noted that the purchase consideration of the shares was recorded elsewhere in the impugned order at Rs.7,30,500/-.

4.1 The learned PCIT also rejected the contention that the Assessing Officer had adopted one of two possible views. According to the learned PCIT, once the entire transaction had been regarded as sham and bogus, there was only one possible view, namely, that the entire sale proceeds of Rs.54,24,172/- ought to have been brought to tax. The learned PCIT, therefore, held that there was neither a change of opinion nor a substitution of one possible view by another.

12 ITA No. 8829/Mum/2025 Omprakash Bhadada 4.2 The contention that the revision proceedings were founded solely upon an audit objection was also rejected. The learned PCIT observed that the expression “record” in section 263(1) included all records relating to the proceedings available at the time of examination by the Commissioner, including an audit objection. The learned PCIT maintained that the assessment record had been examined independently before arriving at the conclusion that the assessment order was erroneous and prejudicial to the interests of the Revenue.

4.3 The learned PCIT ultimately held that the Assessing Officer had failed to properly verify and examine the issue and, despite recording a categorical finding that the entire transaction was sham and bogus, had added only Rs.46,94,172/- instead of the entire sale proceeds of Rs.54,24,172/-. The assessment order dated 12.05.2023 was consequently held to be erroneous insofar as it was prejudicial to the interests of the Revenue within the meaning of section 263 and clauses (a) and (b) of Explanation 2 thereto.

4.4 Accordingly, by the impugned order dated 30.10.2025, the learned PCIT set aside the assessment order dated 12.05.2023 to the aforesaid limited extent and directed the Assessing Officer to reframe the assessment de novo on the issue raised in the notice under section 263, in accordance with law and after affording a proper opportunity of being heard to the assessee. The learned

13 ITA No. 8829/Mum/2025 Omprakash Bhadada PCIT expressly directed that the other issues decided in the original assessment order should remain undisturbed.

14 ITA No. 8829/Mum/2025 Omprakash Bhadada and the impugned revisional order record the addition at Rs.46,94,172/-.

15 ITA No. 8829/Mum/2025 Omprakash Bhadada this regard, to paragraph 7 appearing on pages 11 and 12 and sub- paragraph (xi) appearing on page 33 of the assessment order.

9.1 It was submitted that, after examining the material available on record, the Assessing Officer had denied the exemption claimed under section 10(38) of the Act and added Rs.46,94,172/-, being the long-term capital gain claimed as exempt by the assessee. While doing so, the Assessing Officer had necessarily allowed the cost of acquisition of the shares and deducted the same from the sale proceeds of Rs.54,24,172/-. Thus, according to the learned AR, the Assessing Officer had duly applied his mind to the tax treatment of the transaction and had taken a plausible view.

9.2 The learned AR submitted that the learned PCIT, on the other hand, proceeded on the basis that the entire sale proceeds of Rs.54,24,172/- ought to have been added under section 68 of the

16 ITA No. 8829/Mum/2025 Omprakash Bhadada Act. It was contended that the shares had been traded through the Bombay Stock Exchange, being a recognised stock exchange, and delivery of the shares had been effected through the demat account. The sale transactions were supported by the broker’s contract-cum-sale bills, securities transaction tax had been paid and the sale proceeds were duly reflected in the assessee’s bank statement. In such circumstances, the entire sale proceeds could not be treated as an unexplained cash credit under section 68 of the Act.

9.3 The learned AR contended that, at the very least, the taxability of the entire sale proceeds under section 68 was a debatable issue. Consequently, an assessment order adopting one of the legally sustainable views could not be revised under section 263 merely because the learned PCIT preferred another view. The learned AR placed reliance upon Malabar Industrial Co. Ltd. v. CIT, 109 Taxman 66 (SC), and submitted that the twin statutory conditions for invoking section 263, namely, that the assessment order must be erroneous and prejudicial to the interests of the Revenue, were not satisfied. Reliance was also placed upon the decision of the Co-ordinate Bench in Mrs. Suneeta Sekhri, legal heir of Mr. Anmol G. Sekhari, ITA No.1091/Mum/2025, order dated 02.02.2026, wherein, according to the learned AR, an identical revisional order involving denial of exemption under section 10(38) in respect of alleged penny-stock transactions and proposed addition of the entire sale proceeds under section 68 was decided in favour of the assessee. The learned AR also relied upon

17 ITA No. 8829/Mum/2025 Omprakash Bhadada Jaishree Ravi Sancheti, ITA No.2269/Mum/2024, order dated 27.09.2024, wherein, according to him, a revisional order passed under section 263 on an identical issue was quashed.

9.4 The learned AR next submitted that the show-cause notice under section 263 had been issued on the basis of an audit objection. No independent enquiry had been conducted by the learned PCIT and no new evidence had been brought on record. According to the learned AR, revision under section 263 could not be sustained on the same set of facts merely on the basis of an audit objection, particularly when the Assessing Officer had already taken a possible view after conducting an enquiry. In support of this contention, reliance was placed upon CIT v. Maharashtra Hybrid Seeds Co. Ltd., 102 taxmann.com 48 (Bom).

9.5 The learned AR further submitted that the Assessing Officer had denied exemption in respect of the long-term capital gain of Rs.46,94,172/- on the ground that the assessee had failed to establish the genuineness, credibility and authenticity of the transactions in the shares of M/s Nyssa Corporation Ltd. The assessee had already challenged the said addition by filing an appeal before the learned CIT(A) on 27.05.2023. Thus, the larger issue concerning the genuineness and taxability of the share transaction was already pending for adjudication before the first appellate authority.

18 ITA No. 8829/Mum/2025 Omprakash Bhadada 9.6 It was contended that, when the larger issue concerning the addition of Rs.46,94,172/- was pending before the learned CIT(A), the learned PCIT could not assume revisional jurisdiction in respect of the smaller and consequential issue concerning the cost of acquisition of the shares. In support of this proposition, the learned AR relied upon Smt. Renuka Philip v. ITO, 101 taxmann.com 119 (Mad). Reliance was also placed upon the orders of the Co-ordinate Benches in Jaishree Ravi Sancheti, ITA No.2269/Mum/2024, order dated 27.09.2024, and Shri Anil Goyal v. PCIT, ITA No.370/Mum/2024, order dated 26.08.2024, wherein, according to the learned AR, revisional orders passed under section 263 on an identical issue and on the same set of facts were held to be without jurisdiction and were quashed.

9.7 The learned AR, accordingly, submitted that the Assessing Officer had made adequate and specific enquiries, examined the documentary evidence furnished by the assessee and adopted a plausible view by adding the long-term capital gain claimed as exempt after allowing the cost of acquisition of the shares. The assessment order could not, therefore, be regarded as either erroneous or prejudicial to the interests of the Revenue. He accordingly prayed that the impugned order passed under section 263 be quashed and the assessment order dated 12.05.2023 be restored.

19 ITA No. 8829/Mum/2025 Omprakash Bhadada 10. Per contra, the learned Departmental Representative (DR) supported the impugned revisional order. He submitted that the reassessment proceedings had been initiated on the basis of information received on the Insight Portal pursuant to the search and seizure action conducted by the Investigation Wing on 19.03.2019 in the case of the syndicate allegedly led by Shri Naresh Jain. According to the learned DR, incriminating documents found during the search revealed the modus operandi adopted for providing bogus long-term capital gains and manipulating the prices of various scrips.

10.1 The learned DR submitted that, during the reassessment proceedings, the Assessing Officer had issued notices under sections 143(2) and 142(1) of the Act and had called upon the assessee to furnish information and evidence concerning the transactions in the shares of M/s Nyssa Corporation Ltd. The Assessing Officer had specifically required the assessee to explain the basis upon which he had decided to invest in the said scrip. However, the assessee had failed to furnish any satisfactory explanation concerning the selection of the scrip and had also failed to establish the genuineness of the transaction.

10.2 The learned DR submitted that the Assessing Officer, on the basis of the detailed investigation report and the material available on record, had categorically held that the transaction in the shares of M/s Nyssa Corporation Ltd. was non-genuine. The Assessing Officer had recorded that the assessee failed to prove the

20 ITA No. 8829/Mum/2025 Omprakash Bhadada genuineness, credibility and authenticity of the transaction and had accordingly treated the long-term capital gain arising from the purchase and sale of the shares as non-genuine and unexplained. Referring to paragraphs 6 and 6.1 of the impugned order, the learned DR submitted that the Assessing Officer had himself concluded that the entire transaction was sham and had been used as a conduit for converting unaccounted money into money recorded in the regular books of account. Therefore, once the entire transaction was treated as sham and bogus, the Assessing Officer ought to have brought the entire sale proceeds of Rs.54,24,172/- to tax instead of restricting the addition to the long-term capital gain of Rs.46,94,172/-.

10.3 The learned DR contended that the aforesaid inconsistency between the findings recorded by the Assessing Officer and the addition ultimately made demonstrated that the issue had not been examined in the correct perspective. According to him, the Assessing Officer had not applied his mind to the necessary consequence of his own finding that the entire transaction was sham and bogus. The assessment order was, therefore, erroneous insofar as it was prejudicial to the interests of the Revenue.

10.4 As regards the contention that the larger issue was pending before the learned CIT(A), the learned DR relied upon the findings recorded by the learned PCIT in paragraphs 8.1.1, 8.1.2 and 8.2.1 of the impugned order. He submitted that the pendency

21 ITA No. 8829/Mum/2025 Omprakash Bhadada of an appeal before the learned CIT(A) did not preclude exercise of revisional jurisdiction in respect of an issue which had not been properly considered by the Assessing Officer. In this regard, the learned DR relied upon the decision referred to by the learned PCIT in BSES Rajdhani Power Ltd. v. PCIT [[2023] 152 taxmann.com 139 (SC)] and submitted that non-consideration of the entire amount and consideration of only a part thereof constituted an error capable of correction under section 263 of the Act.

10.5 The learned DR also placed on record a copy of Settlement Order No. SO/EFD-2/SD/148/JUNE/2017 dated 05.06.2017 passed by the Securities and Exchange Board of India on Settlement Application No.3065 of 2016 filed by Hotel Polo Towers Pvt. Ltd. in the matter of M/s Nyssa Corporation Ltd., formerly known as Ravinay Trading Company Ltd. The learned DR relied upon the aforesaid settlement order as material relating to the scrip of M/s Nyssa Corporation Ltd. and submitted that it supported the Revenue’s case concerning the nature of the scrip and the necessity of examining the entire sale transaction in the correct perspective. He accordingly prayed that the appeal filed by the assessee be dismissed and the revisional jurisdiction exercised by the learned PCIT under section 263 of the Act be upheld.

10.6 The learned DR further placed reliance upon the decision of the Hon’ble Calcutta High Court in Principal Commissioner of Income-tax v. Reena Jain [2025] 174 taxmann.com 849 (Calcutta), particularly paragraph 6 thereof.

22 ITA No. 8829/Mum/2025 Omprakash Bhadada He submitted that the said case also concerned an alleged accommodation entry of long-term capital gain arising from transactions in the shares of M/s Nyssa Corporation Ltd.

10.7 The learned DR submitted that information available on the ITBA system and the material received from the Investigation Wing concerning accommodation entries in the shares of M/s Nyssa Corporation Ltd. could not be disregarded. He contended that, where the assessee failed to satisfactorily establish the nature, source and genuineness of the transaction, the Revenue authorities were justified in examining the transaction in the light of the investigation material. The learned DR accordingly submitted that the learned PCIT was justified in holding that the Assessing Officer had not examined the taxability of the entire sale proceeds in the correct perspective.

23 ITA No. 8829/Mum/2025 Omprakash Bhadada the interests of the Revenue within the meaning of section 263 of the Act.

11.1 The scope of section 263 is well settled. The conditions that the assessment order must be erroneous and that it must be prejudicial to the interests of the Revenue are cumulative. The absence of either condition denudes the PCIT of revisional jurisdiction. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), the Hon’ble Supreme Court held as under:

11.2 The Hon’ble Supreme Court further explained that where the Assessing Officer adopts one of the courses permissible in law, or where two views are possible and the Assessing Officer adopts one such view, the order cannot be treated as erroneous and prejudicial to the interests of the Revenue merely because the Commissioner prefers another view, unless the view adopted by the Assessing Officer is unsustainable in law.

11.3 When the aforesaid principles are applied to the present case, we are unable to agree with the learned PCIT that the assessment order was passed without making the enquiries or verification which ought to have been made. The assessment record demonstrates that the Assessing Officer had issued a notice

24 ITA No. 8829/Mum/2025 Omprakash Bhadada under section 143(2) and several notices under section 142(1) of the Act. The questionnaires specifically called for the details of the purchase and sale of the shares of M/s Nyssa Corporation Ltd., including the date and amount of purchase, source of the purchase consideration, bank statements, demat account statements, contract notes, broker’s ledger, dates and quantities of the shares sold and the computation of the capital gain.

11.4 The assessee furnished the bank statement, audited financial statements, computation of income, contract notes and the ledger account appearing in the books of M/s Consortium Securities Pvt. Ltd. The Assessing Officer was, therefore, aware that the original 3,998 shares were purchased on 10.08.2012 for Rs.7,30,500/-, that the shares became 39,980 shares upon a split and that the entire holding was subsequently sold during October 2013. The Assessing Officer also knew the quantum of the sale proceeds and the long-term capital gain claimed as exempt under section 10(38) of the Act.

11.5 The Assessing Officer did not accept the assessee’s explanation. He analysed the return earned by the assessee, the alleged modus operandi described in the investigation report, the assessee’s knowledge and experience in share investment and the absence of a satisfactory explanation regarding the selection of the scrip. Thereafter, a specific show-cause notice proposing variation of income was issued on 04.05.2023. Upon considering the material, the Assessing Officer consciously treated the long-term

25 ITA No. 8829/Mum/2025 Omprakash Bhadada capital gain of Rs.46,94,172/- as non-genuine and unexplained and added the same to the income of the assessee.

11.6 Thus, this is not a case in which the Assessing Officer omitted to enquire into the share transaction or allowed the claim for exemption under section 10(38) without verification. The very subject matter for which the reassessment was initiated was the transaction in the shares of M/s Nyssa Corporation Ltd. The Assessing Officer examined that transaction at considerable length and ultimately rejected the exemption claimed by the assessee. Merely because the learned PCIT considered that a further or larger addition ought to have been made would not convert the enquiry conducted by the Assessing Officer into a case of “no enquiry”.

11.7 The learned PCIT invoked clauses (a) and (b) of Explanation 2 to section 263. However, the deeming provisions in Explanation 2 cannot be read independently of the substantive conditions contained in section 263(1). Once the record demonstrates that the Assessing Officer made enquiries into the precise issue and thereafter adopted a view, Explanation 2 cannot be invoked merely because the learned PCIT considers the enquiry inadequate or the conclusion erroneous, without first demonstrating that the view adopted by the Assessing Officer was unsustainable in law.

11.8 The learned PCIT proceeded on the basis that, once the transaction had been described by the Assessing Officer as sham

26 ITA No. 8829/Mum/2025 Omprakash Bhadada and bogus, the inevitable consequence was to add the entire sale proceeds of Rs.54,24,172/- under section 68 of the Act. We are unable to accept that this was the only legally permissible conclusion. The purchase of the shares was recorded in an earlier year. The cost of acquisition and the relevant purchase particulars were before the Assessing Officer. Whether, upon rejecting the exemption under section 10(38), the net capital gain should be brought to tax or whether the entire sale proceeds should be assessed under section 68 is itself a matter requiring examination of the nature and source of the respective credits and the evidence relating to the acquisition of the shares. The gross sale proceeds do not automatically become unexplained merely because the resultant capital gain is treated as non-genuine.

11.9 The learned PCIT did not bring on record any material demonstrating that the purchase consideration of Rs.7,30,500/- did not represent an actual cost incurred by the assessee, that the purchase entry itself represented a fictitious credit in the relevant year, or that the entire amount of Rs.54,24,172/- constituted unexplained money introduced by the assessee during the year under consideration. The learned PCIT merely drew a different legal consequence from the same facts examined by the Assessing Officer. In our considered view, this amounts to substitution of the learned PCIT’s opinion for the view adopted by the Assessing Officer.

27 ITA No. 8829/Mum/2025 Omprakash Bhadada 12. In CIT v. Maharashtra Hybrid Seeds Co. Ltd. [2019] 102 taxmann.com 48 (Bom), the Hon’ble jurisdictional High Court found that the Assessing Officer had considered the explanations and arguments of the assessee and held: 9. As rightly held by the Tribunal, this note firstly shows that all the explanations and arguments of the Assessee have been considered by the Assessing Officer and secondly that the action taken under Section 263is only on the basis of the audit party's note or report, who it would appear, ultimately did not approve of the Assessing Officer's view regarding the allowability of the deduction. Admittedly, the CIT has not referred to any audit objection but in the light of the note, the Tribunal held that it would be a fair inference that his action under Section 263 was consequent upon the audit objection. Be that as it may, this office note clearly shows that the Assessing Officer had taken all explanations and arguments of the Assessee into consideration before allowing deduction. This being the case, the CIT could not have merely substituted his own views for that of the Assessing Officer by invoking Section 263 of the I. T. Act.

The ratio applies to the present case. The fact that an audit objection may form part of the “record” does not dispense with the requirement that the PCIT must independently establish that the assessment order is erroneous and prejudicial to the interests of the Revenue. An audit objection can bring an issue to the notice of the PCIT, but cannot, by itself, convert a possible view adopted after enquiry into an erroneous order.

28 ITA No. 8829/Mum/2025 Omprakash Bhadada the ground that the entire sale consideration, without allowing the cost of acquisition, ought to have been added. The Coordinate Bench quashed the revisional order, observing: “The details with regard to the cost of acquisition was part of examination conducted by the AO who still proceeded to bring to tax the net capital gain as addition under section 68 of the Act.” (para 10)

The material facts and the precise revisional issue in the present appeal are substantially similar. No distinguishing feature has been brought to our notice warranting departure from the said decision.

13.1 Similar principles were followed in Shri Anil Goyal v. PCIT, ITA No.370/Mum/2024, order dated 26.08.2024, wherein the Coordinate Bench held: 5. We have heard the parties and perused the material available on record. Admittedly, the appeal against the main addition of Rs.4,52,57,410/- on account of disallowance of LTCG is pending before the CIT(Appeals) and therefore in view of the decision rendered by the Hon’ble High Court in the case of Smt. Renuka Philip (supra) wherein it was held that the assumption of jurisdiction u/s 263 of the Act on a smaller issue, based on the larger issue is un-sustainable,the impugned order is un-sustainable .

The Coordinate Bench took note of the fact that the principal addition concerning the alleged bogus long-term capital gain was already pending before the CIT(A) and set aside the revisional order relating to the consequential issue.

13.2 In Mrs. Suneeta Sekhri, legal heir of Mr. Anmol Govindram Sekhri v. PCIT, ITA No.1091/Mum/2025, order dated 02.02.2026, the Coordinate Bench considered a

29 ITA No. 8829/Mum/2025 Omprakash Bhadada reassessment involving an alleged penny-stock transaction, where the Assessing Officer had made a detailed investigation and the PCIT sought to revise the assessment. The Coordinate Bench held: 5. We have carefully considered all aspects of the case. It is noticed from the records, replies submitted that he AO in the instant case has made a detailed investigation and enquiry in the matter before arriving at the conclusion. The addition made by him are stated to be still pending before the first appellate authority in the quantum appeal. We also find that the ld. PCIT has also acknowledged the above facts in the body of the revision order itself. In such a situation, the observations and his findings constitute a mere change of opinion. Moreover, with taking due note of the fact that quantum appeal was already pending on the impugned issue, he was wrong in assuming jurisdiction on the same issue which is not permitted by the provisions of section 263 of the Act. There being adequate enquiry by the AO, it cannot be said that the assessment order was passed without making any enquiry and therefore Explanation 2 to the section was clearly not applicable to the facts of the case. Moreover, as rightly pointed out by the ld.AR that the coordinate bench in another case involving the same scrip had deleted similar addition in the case of Kishore Jethalal Morabiain ITA No. 582/Mum/2025 dated 14.07.2025. Therefore, even on this count, it could well be concluded that the issue in hand is a debatable one on which different views could be taken and on which section 263 provisions cannot be invoked otherwise also. 13.3 The assessee also relied upon Smt. Renuka Philip v. ITO [2019] 101 taxmann.com 119/[2018] 409 ITR 567 (Mad). The Hon’ble Madras High Court, while interpreting Explanation 1(c) to section 263(1), observed: “Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar.” (para 23)

13.4 The Court further held:

“This reason assigned by the Assessing Officer has been found by us to show due application of mind. As observed, we cannot expect an

30 ITA No. 8829/Mum/2025 Omprakash Bhadada Assessing Officer to write a judgment. In such circumstances, the view taken by the Commissioner in his order under Section 263 of the Act has to be termed as a change of opinion, or in other words, the Assessing Officer adopted one of the two views possible and in such circumstances, it cannot be stated that the order is prejudicial to the interest of the Revenue as well as erroneous.” (para 24)

13.5 In the present case, the addition of Rs.46,94,172/- arising from the same share transaction was already challenged before the learned CIT(A) on 27.05.2023. The issue sought to be revised by the learned PCIT, namely, whether the cost of acquisition should be allowed while taxing the alleged bogus transaction, is integrally connected with the subject matter of the pending quantum appeal.

13.6 The learned PCIT, however, relied upon BSES Rajdhani Power Ltd. v. PCIT [2017] 88 taxmann.com 25 (Delhi), the special leave petition against which was dismissed by the Hon’ble Supreme Court. In that case, the Assessing Officer had considered only a part of the depreciation claim and had not examined the larger claim. The Hon’ble Delhi High Court observed: “The non-consideration of the larger claim for Rs.298.93 crores as depreciation and the consideration of only a part of it...was an error, that could be corrected under Section 263.” (para 15)

The said decision does not assist the Revenue in the present case. Here, the Assessing Officer had before him the purchase consideration, the sale proceeds and the computation of the long- term capital gain. He examined the entire share transaction and consciously added the net long-term capital gain. It is, therefore,

31 ITA No. 8829/Mum/2025 Omprakash Bhadada not a case of non-consideration of the larger amount or omission to examine an independent component of the claim.

32 ITA No. 8829/Mum/2025 Omprakash Bhadada 16. The aforesaid decision is distinguishable. First, the issue before the Hon’ble Calcutta High Court concerned the validity of a reassessment and the correctness of the Tribunal’s finding that the Assessing Officer had acted on borrowed satisfaction. It did not concern the exercise of revisional jurisdiction under section 263 on the distinction between the gross sale proceeds and the net long- term capital gain. Secondly, unlike the facts recorded in Reena Jain, the present assessee furnished the bank statement, contract notes, financial statements and the broker’s ledger, which were considered by the Assessing Officer before making the addition. Thirdly, we have not ignored the reasoning of the Assessing Officer or the learned PCIT. Upon examining that reasoning, we find that the Assessing Officer had conducted an enquiry and had consciously adopted a particular tax treatment.

16.1 The SEBI Settlement Order No. SO/EFD-2/SD/148/ JUNE/2017 dated 05.06.2017 also does not advance the Revenue’s case for sustaining the exercise of jurisdiction under section 263. The said order was passed on an application filed by Hotel Polo Towers Pvt. Ltd. and not by the present assessee or M/s Nyssa Corporation Ltd. The proceedings related to failures to make disclosures under the SEBI (Prohibition of Insider Trading) Regulations, 1992 and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, in respect of specified transactions undertaken during December 2011 and January to March 2012.

33 ITA No. 8829/Mum/2025 Omprakash Bhadada 16.2 Significantly, the settlement application was disposed of “without admitting or denying the findings of fact and conclusions of law”. The settlement order does not record any finding that the present assessee participated in price manipulation or that his purchase on 10.08.2012 and sales during October 2013 were synchronized or collusive transactions. The settlement order may form part of the wider background relating to the scrip, but it does not establish that the Assessing Officer’s decision to add the net long-term capital gain, after examining the transaction, was unsustainable in law. Further, a revisional order must stand or fall on the reasons and material forming the basis of the PCIT’s satisfaction. Its jurisdictional defects cannot be cured by additional material subsequently produced during appellate proceedings.

34 ITA No. 8829/Mum/2025 Omprakash Bhadada 18. We accordingly set aside the impugned order dated 30.10.2025 passed under section 263 of the Act and restore the assessment order dated 12.05.2023. Our observations are confined to the validity of the assumption of jurisdiction under section 263 and shall not prejudice the adjudication of the assessee’s pending quantum appeal before the learned CIT(A) on the merits of the addition of Rs.46,94,172/-.

Order pronounced in the open court on 27.07.2026.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated 27/07/2026 PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मु�ई / DR, ITAT, Mumbai 5.

35 ITA No. 8829/Mum/2025 Omprakash Bhadada गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�ािपत �ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�ई / ITAT, Mumbai