SUNITA MOTILAL SINHA,MUMBAI vs. INCOME TAX OFFICER WARD 32(1)(1), 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. 6382, 6383 and 6384/MUM/2025 Assessment Years: 2012-13, 2015-16 and 2015-16

Sunitha Motilal Sinha, 17 1st Floor Income Tax Officer - 32(1)(1), Heaven View Building No.1 Green field Kautilya Bhawan, Mumbai - Complex Mahakali caves Road Andheri Vs. 400011, Maharashtra. East Mumbai – 400011, Maharashtra. PAN NO. AFXPS 8836 A APPELLANT RESPONDENT

: Shri Mani Jain, CA a/w Shri Prateek Assessee by Jain, CA Department by : Shri Basavaraj Hiremath – CIT DR a/w Shri Rajgopal Parthasarathi - (SR. DR).

Date of Hearing : 14.07.2026 : 20.07.2026 Date of pronouncement

ORDER u/s 254(1) of Income Tax Act, 1961 PER: Om Prakash Kant, AM

These three appeals have been preferred by the assessee against three separate orders passed by the Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the Ld. CIT(A)"], pertaining to Assessment Years 2012-13 and 2015-16. Of the three appeals, two relate to Assessment Year 2015-16 and arise out of two separate

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assessment orders passed by the Assessing Officer (AO) under section 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Since the issues involved in all the appeals are substantially common and arise out of interconnected facts, they were heard together. Accordingly, for the sake of convenience, consistency, and to avoid repetition of facts and reasoning, all the appeals are being disposed of by this consolidated order.

“1. On the facts and circumstances of the Appellant's case and in law the Id. CIT(A) erred in passing an ex-parte order without providing adequate opportunity of being heard to the appellant. 2. On the facts and circumstances of the Appellant's case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in reopening the assessment u/s. 147 by issue of notice dated 28.03.2019 u/s. 148 which is merely due to change of opinion and therefore the re-opening is bad in law. 3. On the facts and circumstances of the Appellant's case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in treating the purchases of shares made by the appellant, as unexplained cash credit and invoking the provision of section 68 of the Income Tax Act, 1961, for reasons stated in the impugned order or otherwise. 4. On the facts and circumstances of the Appellant's case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making an addition of Rs. 25,00,000/- u/s 68 of the Act, on account of alleged bogus purchases, for reasons stated in the impugned order or otherwise. 5. On the facts and circumstances of the Appellant's case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making an addition of Rs. 75,000/- u/s 69C of the Act, on account of alleged commission paid @3% on such purchase of shares, for reasons stated in the impugned order or otherwise. 6. Without prejudices to the above grounds, on the facts and circumstances of the case and in law the Learned Assessing Officer erred in making addition of Rs.25,00,000/- on account of alleged bogus purchase without considering the

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fact that the sales consideration from sale of same script has been added to the income of the appellant in the succeeding years, leading to double taxation.” 2.1 At the outset, the learned counsel for the assessee invited our attention to the application seeking condonation of delay of 342 days in filing the present appeal. It was submitted that the impugned appellate order could not be acted upon within the prescribed period for reasons beyond the control of the assessee.

2.2 The learned counsel submitted that the e-mail address registered on the Income-tax portal pertained to the assessee's erstwhile tax consultant, who neither informed the assessee of the notices issued by the learned CIT(A) nor forwarded the appellate order. It was further submitted that during the relevant period, the assessee remained preoccupied with the prolonged medical treatment of her son and dependent parents, which prevented her from attending to the pending tax proceedings. It was only when the assessee received intimation from the bank regarding attachment of her bank account for recovery of the outstanding demand that she became aware of the ex parte appellate order. Immediately thereafter, she contacted her present tax consultant and filed the instant appeals without any further delay. The affidavit filed in support of the application is duly accompanied by medical records substantiating the circumstances pleaded. The relevant part of the affidavit of the assessee is reproduced as under:

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“1. On the facts and circumstances of the Appellant's case and in law the Id.AO erred in the reopening the case of the appellant in a mechanical manner and application of mind. 2. On the facts and circumstances of the Appellant's case and in law the Id. AO erred in making the addition on protective basis without appreciating the fact that the substantiative addition has been deleted by the Hon'ble Tribunal. 3 However. I had then received intimation from the bank that my bank account has been attached on account of recovery of the demand pertaining to AY 2012- 13 in the month of October 2025. 4. On further checking the income tax portal, I found that an ex-parte order by CIT (A) dated 09.08.2024 was passed in my case. 5. It is understood that the notice of hearing were sent on old email-id zealconsultancy@hotmail.com and dhanish.jain78@gmail.com.. However, the said email addresses pertain to my earlier tax consultant who is not in touch with me & such notices were not forwarded for necessary action. Therefore, I say that have actually not received any email communication of the hearing notices and the said CIT(A) order. 6. 1 say that apart from the above, my family member including by son and my mother had also suffered certain medical anomalies in last 2 years, due to my preoccupation with their medical treatment, I could not update myself with the pending/on-going proceedings on timely basis from my current tax consultant. 7. Further, I say that in September 2023, my son was bed ridden due to injury in his leg which took a considerable period of time for its treatment and recovery. It was in the month of December 2024, that doctor after various testing finally advised for surgery. Thereafter, in the month of March 2025, he underwent a major surgery and further medical treatment till August 2025. Copy of the supporting documents in this regard are enclosed as Annexure 1. 8. Similarly, in the said period my mother, who is also a heart patient and dependent on me was also bed ridden and had undergone various medical treatments. Copy of the supporting documents in this regard are enclosed as Annexure 2. 9. Due to these reasons, no proper compliances were made and eventually ex- parte order has been passed. 10. Immediately on realization, I have updated the e-mail id on the income tas portal with my current e-mail address being so sinhaharsh80@gmail.com and asinha0093@gmail.com. 11. I say that when it came to my knowledge that CIT(A) order has been passed in my case, I have immediately discussed the same with my current tax

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consultant who further advised me to file the appeal before the Hon'ble Tribunal. I say that thereafter the appeal was filed before the Hon'ble Income Tax Appellate Tribunal on 08.10.2025. 12. I say that due to such reason, there was a delay of 342 days in filling the appeal before the Hon'ble Tribunal.” 2.3 We have carefully considered the application, the affidavit filed by the assessee and the supporting documentary evidence. The explanation furnished neither appears fanciful nor lacks bona fides. The circumstances narrated constitute sufficient cause within the meaning of law and satisfactorily explain the delay in preferring the appeal. It is well settled that procedural prescriptions relating to limitation are intended to advance the cause of justice and not to defeat it. Unless deliberate negligence, lack of bona fides or mala fide conduct is discernible, a liberal approach deserves to be adopted while considering an application for condonation of delay. Accordingly, being satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period, we condone the delay of 342 days and admit the appeal for adjudication on merits.

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stocks for claiming exempt long-term capital gains, short-term capital losses or business losses. The statutory notices for reopening were issued and complied with.

3.1 Pursuant thereto, reassessment under section 143(3) read with section 147 of the Income-tax Act, 1961 was completed on 20.12.2019, wherein the Assessing Officer treated the investment of Rs.25,00,000 made towards purchase of shares of M/s Rutron International Ltd. as unexplained cash credit under section 68 of the Act. A further addition of Rs.75,000, being 3% of the purchase value, was made under section 69C towards alleged commission paid for arranging the accommodation entry. The learned CIT(A), by the impugned order, affirmed the additions made by the Assessing Officer.

“1. On the facts and circumstances of the Appellant's case and in law the Id.AO erred in the reopening the case of the appellant in a mechanical manner and application of mind. 2. On the facts and circumstances of the Appellant's case and in law the Id. AO erred in making the addition on protective basis without appreciating the fact that the substantiative addition has been deleted by the Hon'ble Tribunal.” 4.1 As the additional grounds raised by the assessee are purely legal in nature and not requiring investigation of fresh facts, therefore same are admitted for adjudication in view of the settled

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principle laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner Of Income Tax [1998] 229 ITR 383 (SC).

Additional Ground No.1 — Validity of Reassessment

6.1 The learned counsel, drew our attention to the copy of the return of income, which is placed on paper book page 11, to demonstrate that the assessee had duly filed her return on 31.07.2012, declaring total income of Rs.9,39,380/-. It was thus

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contended that the jurisdiction assumed under section 147 rests upon a demonstrably incorrect factual premise and is therefore unsustainable in law. The Ld. Counsel referred to the decision of Coordinate Bench of the Delhi Tribunal in the case of Kunwar Ayub Ali Versus ITO in ITA No.3137/DEL/2018.

6.2 We have given our thoughtful consideration to the rival submissions and have carefully perused the material available on record. A plain reading of the reasons recorded unmistakably reveals that the Assessing Officer proceeded on the assumption that the assessee had not filed any return of income for the relevant assessment year. This assumption constitutes one of the principal foundations on which the belief regarding escapement of income was formed.

6.3 However, the factual position emerging from the record is otherwise. The assessee had admittedly filed her return of income on 31.07.2012, which fact was available on the departmental records themselves. Thus, the very premise upon which jurisdiction under section 147 was assumed stands demonstrated to be factually incorrect.

6.4 We find that Coordinate Bench of the Tribunal in the case Kunwar Ayub Ali (Supra) in the identical circumstances, where the return was duly filed by the assessee, however, in the reasons recorded, the AO noted that no return of income was filed and only

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referred to the information received from the Annual Information Return(AIR) and on that basis, he recorded the reasons to believe that income escaped assessment. The Coordinate Bench of the Tribunal (supra) in the said case held that assumption of the jurisdiction on the basis of only incorrect facts cannot be conferred in law. The relevant finding of the Coordinate Bench is reproduced as under: -

“9. With reference to the reasons recorded as noted above, the Id counsel for the assessee submits at the outset that the belief towards escapement has been entertained by the Assessing Officer on the basis that the assessee has not filed the return of income for Assessment Year 2009-10 which is grossly contrary to facts on record. The assessee had duly filed return of income on 31.03.2009 thereby the most basic reason itself is wholly incorrect and not existed and noticeably PAN of the assessee was duly mentioned in sale deed. Secondly, the sale consideration of Rs.98,76,000/- was giving rise to allegation of escapement towards the sale consideration for the purposes of escapement of capital gain whereas actual share of sale consideration relatable to the assessee stands at Rs. 24,69,000/- only and therefore, the basic information is yet again wrong and mentioned in reasons without application of mind. 10. We find that the issue is squarely covered in favour of the assessee by the judgments rendered in the case of Mumtaz Hazi Mohmad Menon (2018) 408 ITR 268 (Guj). As per the ratio of the judgment, the assumption of jurisdiction on the basis of wholly incorrect facts cannot be conferred in law. In this case also, the reasons cited were that the assessee did not file return and the capital gain on sale consideration was not brought to tax which reasons were found to be factually incorrect. The assessee had return of income which was not noticed by the Assessing Officer. Consequently, the notice issued under Section 148 for reopening the assessment was quashed for assumption of jurisdiction on factually incorrect premise. In the similar fact situation, the Hon'ble Gujarat High Court also quashed the re-assessment proceedings in Sagar Enterprises vs. ACIT, (2001) 257 ITR 335 (Guj.) where reasons were recorded dehors the fact, i.e., return not filed when the return was actually filed. Similarly, Hon'ble Delhi High Court in Dr. Ajit Gupta vs. ACIT, 383 ITR 361 (Del) has observed that reason for reopening of assessment based on mistaken factual premise is unsustainable in law. 11. In the light of the aforesaid judgments declaring the position of law, we find merit in the plea of the assessee towards inherent lack of jurisdiction under

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Section 147 of the Act. In the instant case also, the assessee had filed return of income and declared the transaction arising on sale of property which fact was not taken cognizance by the Assessing Officer while reopening the assessment. 12. The reopening proceedings itself being not permissible on the basis of inherently wrong facts, we do not consider it necessary to delve the merits of the addition. We thus set aside the action of the CIT(A) and quash the re-assessment proceedings giving rise to the present appeal.” 6.5 The Coordinate Bench in Kunwar Ayub Ali (supra), after considering the judgments of the Hon'ble Gujarat High Court in Mumtaz Hazi Mohmad Menon (supra), Sagar Enterprises (supra), and the Hon'ble Delhi High Court in Dr. Ajit Gupta (supra), held that reassessment initiated on a fundamentally erroneous factual assumption is legally unsustainable, as the requisite "reason to believe" cannot be founded upon incorrect facts.

6.6 We respectfully concur with the aforesaid principle. Jurisdiction under section 147 cannot be assumed on the basis of incorrect or non-existent facts. The statutory satisfaction contemplated under the provision necessarily requires due application of mind to the material available before the Assessing Officer. Where the foundational facts themselves are demonstrably erroneous, the assumption of jurisdiction becomes legally infirm.

6.7 The facts of the present case are materially identical to those considered in Kunwar Ayub Ali (supra). Respectfully following the said decision, we hold that the reassessment proceedings initiated

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under section 147 are invalid in law. Accordingly, Additional Ground No.1 raised by the assessee is allowed.

Additional Ground No.2 — Protective Addition

7.1 We have heard rival submission of the parties on the issue on dispute. We find considerable merit in this alternate contention

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advanced on behalf of the assessee. The AO made the addition of Rs. 25 Lakhs for purchase in shares of the M/s Rutron International Limited and commission expenses thereon, on protective basis, observing as under:

“15. Thus considering the findings of the search/ survey, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the total transaction amount of Rs.25,00,000/- on purchase of shares of M/s Rutron International Ltd. is hereby added in the total income of the assessee as unexplained cash credit u/s.68 of the I.T. Act, 1961. Penalty proceeding u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income with a view to concealment of income. (Addition: Rs. 25,00,000/-) 16 Further, Rs.75,000/-, being 3% of purchase value of Rs.25,00,000/-, is hereby added in the income of the assessee as unexplained expenditure u/s.69C on account of commission paid for arranging the entire transaction. Penalty proceeding u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income with a view to concealment of income. (Addition: Rs.75,000/-) 17. But, during the assessment proceedings of A.Y. 2014-15 in the assessee's own case, total sale consideration on sale of shares of M/s Rutron International Limited which was purchased in the year under consideration was already added, therefore, considering the peculiar facts of the case, the transaction done in the said penny scrip of Rs. 25,00,000/- as purchase price is hereby added as protective demand to the assessee's income subject to the further appellate proceedings, if any as assessee had not give justification for source thereof. Penalty proceedings u/s. 271(1)(c) of the I. T. Act, 1961 is hereby separately initiated for concealment of income in his return of income.” 7.2 Before us the Ld. Counsel for the assessee referred to the assessment order for 2014-15, which is available on paper book page 13-32. In said assessment order, the AO made addition in for entire sale proceeds of said shares which included the investment value of the share. Further, the learned counsel invited our attention to the order of the Coordinate Bench in ITA

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No.3662/Mum/2023 for Assessment Year 2014-15 dated 19.04.2024, whereby the substantive additions relating to the very same transactions in the shares of M/s Rutron International Ltd. were deleted. The relevant factual finding of the Tribunal is reproduced as under:

“6. We have heard rival contentions and perused the record. We notice that the assessing officer has primarily placed reliance on the report given by the Investigation wing of the Income tax department, Kolkata to arrive at the conclusion that the long term capital gains reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation wing, Kolkata is a generalized report with regard to the modus operandi adopted by the brokers to manipulate the prices of certain shares to suit their requirement in generating bogus capital gains/capital losses. We notice that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of prices. The Ld A.R submitted that the SEBI, who is regulator of stock market operations, has not conducted any enquiry with the assessee. We notice that the enquiry conducted with the broker through whom the transactions of purchase and sale were effected, was on different issues. 7. From the demat account copy furnished by the assessee, we notice that the assessee is a regular investor, i.e., she is holding shares of other companies also. Thus, the impugned transactions are not isolated. transactions of purchase and sale. Hence the version of the assessee that she has purchased shares of M/s Rutron International Ltd in the regular course of making investments cannot be doubted with. There is no dispute that the assessee has (a) purchased these shares by paying consideration through banking channels and relevant documents for purchase have been furnished. (b) The shares were received and kept in the Demat account.

(c) sold the shares through stock exchange platform

(d) received the sale consideration through banking channels.

Thus, the shares have entered and exited the demat account of the assessee. Under these set of facts, we are of the view that the genuineness of the

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transactions of purchase and sale of shares can be doubted with only, if the AO could bring some other evidences to disprove the documents furnished by the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee. Further, the AO has not brought on record any material to show that the assessee was part of the group that was manipulating the prices of shares. Under these set of facts, we are of the view that there is no reason to suspect the purchase and sale of shares undertaken by the assessee.” 7.3 The Tribunal thereafter following various decisions in the case deleted the addition of the unexplained cash credit u/s 68 observing as under:-

“12. Accordingly, in the facts and circumstances of the case, view that the decisions rendered by the jurisdictional Hon'ble Bombay High are of the Court in the cases cited above shall apply to the facts of the present case, since the AO has not established that the assessee was also involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee. The Ld decision rendered by Hon'ble Kolkata High Court in the case of Swati Bajaj CIT(A) has placed reliance on the (supra). However, we have followed the principles laid down by the jurisdictional Hon'ble Bombay High Court in deciding the issue. regard to the decision rendered by the co-ordinate bench in the case of Shri With Hitendra G Ghadia (supra), we may observe that the revenue did not show parity of facts and further, we notice that the co-ordinate bench did not refer to the binding decisions of Hon'ble Bombay High Court. Hence, we are of the view that the revenue could not place reliance on both the decisions referred above. 13. In view of the foregoing discussions, we hold that the transactions and purchase and sale of shares of M/s Rutron International Ltd cannot be doubted with and consequently, the sale proceeds cannot be assessed as unexplained cash credit u/s 68 of the Act. Accordingly, the addition relating to estimated expenses is also liable to deleted. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned additions made by him.”

7.4 Once the substantive addition in respect of the very same transaction has already been deleted by the Coordinate Bench on merits, the protective addition made in the present assessment year cannot survive independently. A protective assessment is merely a precautionary measure adopted to safeguard the interests of the

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Revenue where uncertainty exists regarding the person or the year in which a particular income is taxable. It has no independent existence once the substantive addition itself ceases to survive. After deletion of the substantive addition by the Tribunal, the very foundation of the protective addition disappears. Accordingly, we hold that the addition of Rs.25,00,000 made under section 68 together with the consequential addition of Rs.75,000 under section 69C is wholly unsustainable. Additional Ground No.2 is, therefore, allowed.

8.1At the outset, it is noticed that the present appeal has been filed with a delay of 479 days. The assessee has filed an application seeking condonation of delay supported by a duly sworn affidavit. The reasons assigned therein are identical to those considered by us while adjudicating the application for condonation of delay in the assessee's appeal for Assessment Year 2012-13.

8.2 Since we have already held, while dealing with the earlier appeal, that the explanation furnished by the assessee constitutes sufficient cause for the delay, and the factual matrix remains unchanged, judicial consistency demands that the same view be

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adopted in the present proceedings as well. Accordingly, for the reasons recorded in our order for Assessment Year 2012-13, the delay of 479 days in filing the present appeal is condoned and the appeal is admitted for adjudication on merits.

“On the facts and in the circumstances of the case and in law, the Ld. AO initiating reassessment proceedings vide issue of notice u/s 147 of the Act dated 13.01.2017 before the expiry of the statutory time limit for issuance of notice under section 143(2) in respect of the original return of income, and therefore, the reassessment proceedings are without jurisdiction, invalid in law and liable to be quashed.” 9.1 The additional ground being purely legal in nature and not requiring investigation of fresh facts , therefore same is admitted for adjudication in view of the settled principle laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner of Income Tax [1998] 229 ITR 383 (SC).

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statutory period available to the Assessing Officer for issuance of notice under section 143(2) continued to remain available till 30.09.2017, being six months from the end of the financial year in which the return was furnished.

10.1 Inviting our attention to the notice issued under section 148, placed at page 45 of the paper book, the learned counsel pointed out that the said notice was issued on 13.01.2017, i.e., at a point of time when the limitation for issuance of notice under section 143(2) had not expired. It was submitted that the Assessing Officer could not bypass the ordinary statutory procedure prescribed for scrutiny assessment and invoke the extraordinary jurisdiction under section 147 while the regular assessment proceedings were still legally open. In support of the aforesaid proposition, reliance was placed upon the judgment of the Hon'ble jurisdictional Bombay High Court in Smt. Suman v. Income Tax Officer [(2017) 84 taxmann.com 267 (Bom.)] and the decision of the Coordinate Bench of the Tribunal in Nitan Chhatwal Krishani v. DCIT (ITA No.1571/Mum/2021), wherein, following the binding decision of the Hon'ble Bombay High Court, it was held that reassessment proceedings initiated before expiry of the period available for issuance of notice under section 143(2) are without jurisdiction.

10.2 We have thoughtfully considered the rival submissions and carefully examined the material placed before us. The controversy

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involved lies within a narrow compass, namely, whether the Assessing Officer could validly invoke the provisions of section 147 of the Act when the statutory period available for issuance of notice under section 143(2) had not expired.

10.3 This issue is no longer res integra. The Coordinate Bench of the Tribunal in Nitan Chhatwal Krishani (supra), after an elaborate consideration of the judgment of the Hon'ble jurisdictional Bombay High Court in Smt. Suman (supra), as well as various other judicial precedents, has categorically held that the extraordinary jurisdiction under sections 147 and 148 cannot be exercised so long as the regular assessment proceedings remain legally capable of being initiated by issuance of notice under section 143(2). The Hon'ble Bombay High Court in Smt. Suman (supra) has lucidly explained the legal position by holding that proceedings under sections 147 and 148 are not intended to operate as a substitute for, or parallel to, the regular assessment mechanism contemplated under sections 143(2) and 143(3). So long as the statutory period for issuance of notice under section 143(2) subsists, there can ordinarily be no occasion to form a legally sustainable belief that income has escaped assessment, since the Assessing Officer retains full authority to scrutinise the return and complete the assessment under the normal statutory procedure. The Coordinate Bench, applying the aforesaid binding principle, ultimately held that reassessment initiated during the subsistence

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of the period available for issuing notice under section 143(2) is void ab initio, being contrary to the statutory scheme of the Act. The relevant finding of the Coordinate Bench of Tribunal in the case of Nitan Chhatwal Krishani (supra) is reproduced as under:-

“34. We have heard rival contentions and perused the record. In the case of Smt. Suman (supra), the jurisdictional Hon’ble Bombay High Court has examined following question:- “Whether AO can proceed with extraordinary power u/s 147, particularly when normal procedure of assessment of income u/s 143(3) are available which are otherwise within time?” The Hon’ble Bombay High Court has answered this question as under:- “9. It is an undisputed position before us that on 25.01.2000 when the Assessing Officer issued a notice under Section 148 of the Act to reopen the assessment for Assessment Year 1999-2000, even before the time to issue notice under Section 143(2) of the Act to assess under section 143(3) of the Act had expired. It is clear from Section 143(1)(i) of the Act as in force at the relevant time that the intimation thereunder is without prejudice to the right of the Revenue to proceed under Section 143(2) of the Act. Thus, issue of intimation by itself does not bring to an end an assessment proceeding. It comes to an end only when the time to issue a notice under Section 143(2) of the Act expires/come to an end. 10. On the other hand, Section 147/148 of the Act empowers an Assessing Officer to reopen an assessment wherever he has reason to believe that income chargeable to tax has escaped assessment. This power under Section 147/148 of the Act is subject to various limitation provided therein. The power of reopening of assessment can be exercised where assessment has not been completed under Section 143(3) of the Act or even where intimation under Section 143(1)(i) of the Act has been issued provided the time to take further proceeding by issuing notice under Section 143(2) of the Act to complete assessment under Section 143(3) have already expired. So long the time is available to complete an assessment under Section 143(3) of the Act after having issued intimation under Section 143(1) of the Act, there can be no occasion for the Assessing Officer to have reason to believe the income chargeable had escaped assessment, for the reason that the Assessing Officer can issue notice under Section 143(2) of the Act, to complete assessment under Section 143(3) of the Act. Thus, it is a power vested in the Assessing Officer to disturb a concluded issue within a specified period by reopening an 21 Nitan Chhatwal assessment.

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Therefore, it cannot be exercised till the period for completion of assessment has expired. Section 147/148 of the Act is not a power to be exercised to abort the regular assessment proceeding by issuing notice for reopening an assessment. The proceedings under Section 147/148 are not parallel to regular assessment proceedings under Section 143(2) & (3) of the Act. 11. The impugned order relies upon Explanation 2(b) to Section 147 of the Act to sustain the reopening notice. Explanation 2(b) to Section 147 reads as under :— "Section 147 ………….. Explanation: For the purpose of this section, the following shall also be deemed to be cases where income chargeable to tax has been escaped assessment, namely :— (a) …………. (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;" The aforesaid explanation deals with case where income chargeable to tax escapes assessment including a case where a return of income has been filed, but no assessment has been made. The aforesaid explanation seeks to clarify that merely because no assessment has been made even after filing a return, it will not be open to suggest that no income chargeable to tax has escaped assessment. This covers issue where there is no possibility of making an assessment on the date when the notice under Section 147/148 of the Act is issued. So long as the time to issue notice under Section 143(2) of the Act is available, it cannot be said that no assessment has been made as the possibility of making an assessment is always available. The Assessing Officer is obliged to complete assessment under Section 143(3) of the Act by issuing a notice under Section 143(2) of the Act, if he is of the view that the assessee has understated his income or computed excessive loss or understated his tax to the prejudice of the Revenue. Therefore, we are clear that in view of the provisions of Section 143(1)(i) of the Act is in force at the relevant time, no notice under Section 148 of the Act can be issued, till the period to issue notice under Section 143(2) of the Act has expired.” 35. We notice that the Hyderabad bench of Tribunal has also considered an identical issue in the case of Venkata Siva Reddy Nellore Vs ITO (ITAT Hyderabad) in ITA No. 962/HYD/2017 dated 22/11/2017, wherein it was decided in favour of the assessee as under:-

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“8. After considering the orders of authorities and principles of law, I am of Nitan Chhatwal 22 the opinion that the orders of assessing officer and Commissioner (Appeals) cannot be sustained. The issues contested by assessee can be categorized under the heads :– i. Whether reopening under section 147 is correct when the time to issue a notice under section 143(2) is open? ii. Whether the assessment made on the issue without making any addition of the so called escaped income is correct? iii. Whether the non-disposal of assessee objections by a speaking order is correct in law? 8.1. The facts indicate that the assessee filed return of income on 26-7 2013 for assessment year 2012-13, even though belatedly as to the time prescribed under section 139(1), but within the time provided under section 139. On receipt of return, assessing officer has time to issue notice under section 143(2)/142(1) for a period of six months i.e., upto 31-1 2014. However, assessing officer choose to reopen the assessment on the reason of income escaping assessment on 12-12-2013, when the assessment proceedings have not even been started. On the issue whether the proceedings under section 147 are correct when a notice under section 143(2) could have been issued was considered by the Co-ordinate Bench. The Co-ordinate Bench in the case of M/s. Eenadu Relief Fund v. DDIT(E) II in ITA No. 434/Hyd/2010 dt. 13.1.2011 (quoted before the learned Commissioner (Appeals) in written submissions) by assessee, held as under :– “9.3. Return filed for the assessment years 1994-95 on 28-3-1996 and the same was processed under section 143(1). Later 148 Notice was issued on 18-6-1996 though time available for issue of notice under section 143(2) was upto 31-3-1997. 9.4. In the case of CIT v. Qatalys Software Technologies Ltd. (308 ITR 249), the Madras High Court held that reopening is improper when the time limit is available to issue notice (xi) 143(2). As seen from the above, in the case of K M Pachayappan (304 ITR 264) and Qatalys Software Technologies Ltd. (308 ITR 249) Madras HC by placing reliance on the judgment of SC in the case of Rajesh Jhaveri (supra) held that the assessing officer was barred from initiating reassessment proceedings under section 147 when the time for issuance of notice under section 143(2) had not expired. However, taken a different view in the case of ITO v. K M Pachiyappan (311 ITR 31) (Mds.) upheld that the assessing officer in initiating the proceedings under section 147 in similar circumstances. However, it appears that the important distinction in fact of these two cases

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namely time available for issue of notice under section 143(2) had not expired in the case of K. M.Pachiappan (311 ITR 31) has not placed before the Madras High Court. Further, the Tribunal in the case of Super Spinning Mills Ltd. v. Addl. CIT Tribunal Tax (3rd Member) (Chennai) held that :– The department wants to interpret the expression ‘no assessment has been made’ in clause (b) of Explanation 2 to S.147 to mean that it also includes situation where assessment under section 143(3) is till possible but not yet made. If this interpretation is to be accepted, it will set at naught the fundamental principles underlying s.147 and which principles have been followed till date. These principles are applicable even to the extended meaning given to them term ‘escaped assessment’ in the amended provision. The above clause is intended to cover the following two situations (i) where a return is filed and non action is taken either under section 143(1) or under section 143(3) and the time limit for issuing notice under section 143(2) has expired (ii) where a return is filed and is processed under section 143(1) and the time limit for issuing notice under section 143(2) has expired. It does not envisage a situation where a return is filed and the time limit for issue for issue of notice under section 143(2) has not expired. Unless the return filed by the assessee is scrutinized by the assessing officer he cannot come to the conclusion of any escapement. If the assessing officer issues notice under section 143(2), the quite obviously he would scrutinize the return and frame the assessment under section 143(3). Subsequently, he may notice escapement and issue notice under section 148 Besides this, in the above two situations also he will have to look into the return to see whether there is escapement or not. If he notices any escapement, it can be called an escapement only if it is notice after the proceedings under section 147. In that event he will have to issue notice under section 143(2). In nutshell, (a) the proceedings are said to have commenced once the return is filed, and (b) the proceedings terminate when (i) the return is processed under section 143(1) and the time to issue notice under section 143(2) is over (ii) assessment is made under section 143(3) or, (iii) the assessment is no longer possible under section 143(3). Processing under section 147 can be initiated only after the earlier proceedings have terminated as mentioned above. Order under section 147 read with section 143(3) was therefore liable to be quashed. 10. In view of the above discussions, we are inclined to hold that unless the return filed by the assessee is scrutinized by the assessing officer under section 143(3), we cannot come to the conclusion of any escapement, the assessing officer cannot initiate

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proceedings under section 147 when the time for issuance of notice 143(3) has not expired. The case law relied by the assessee’s counsel laid down the same proposition of law. Accordingly, we allow the first ground of the appeal of the assessee by holding that this reopening of assessment by issue of notice under section 148 dated 17-10-2007 is bad in law”. Thus, on the facts of the case and principles of law, the reopening is ab initio void.” 36. In the instant case, we have noticed that the time limit for issuing notice u/s 143(2) was available when the assessing officer issued notice u/s 148 of the Act. As per the ratio of the jurisdictional Hon’ble Bombay High Court referred above and also the decision rendered by the Hyderabad bench Nitan Chhatwal 24 of Tribunal, the said reopening of assessment is bad in law and void ab initio. Accordingly, following the binding decision rendered by Hon’ble jurisdictional Bombay High Court, we quash the impugned orders passed by the tax authorities below for AY 2015-16. Since we have quashed the assessment order, it is not necessary to adjudicate the grounds urged by the revenue on merits.”

10.4 In the present case, it is an admitted position that the assessee filed her return of income on 18.04.2016 and that the statutory period for issuance of notice under section 143(2) remained available till 30.09.2017. Nevertheless, the Assessing Officer proceeded to issue notice under section 148 on 13.01.2017, i.e., well before the expiry of the limitation prescribed for initiating scrutiny assessment under section 143(2). Thus, the Assessing Officer invoked the extraordinary reassessment jurisdiction notwithstanding the availability of the ordinary statutory mechanism for scrutiny assessment. The facts of the present case are, therefore, squarely covered by the decision of the Coordinate Bench in Nitan Chhatwal Krishani (supra), which in turn faithfully applies the binding ratio laid down by the Hon'ble jurisdictional Bombay High Court in Smt. Suman (supra).

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10.5 Respectfully following the aforesaid binding precedents, we hold that the assumption of jurisdiction under section 147 is legally unsustainable. Consequently, the reassessment proceedings initiated under section 148 and the reassessment order passed pursuant thereto are liable to be, and are hereby, quashed. The additional ground raised by the assessee is accordingly allowed.

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“1. On the facts and in the circumstances of the case and in law, the Id. AO erred in initiating the reassessment proceedings by merely reverifying the existing assessment records, without any fresh tangible material coming into his possession so as to justify the assumption of jurisdiction under section 147 of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. AO erred in initiating the reassessment proceedings which is barred by Frist proviso to section 147 of the Act.” 13.1 The Additional Grounds raised by the assessee being purely legal in nature and not requiring investigation on the fresh facts, therefore same are admitted for adjudication in view of the settled principle laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner Of Income Tax [1998] 229 ITR 383 (SC).

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the reasons recorded for reopening, placed at pages 51 to 53 of the paper book.

14.1 We have considered the rival submissions and carefully examined the material available on record. Since the very assumption of jurisdiction under section 147 has been challenged, it would be apposite to reproduce the reasons recorded by the Assessing Officer, which read as under:

“1. In this case, the original return of income was filed by the assessee on 18/04/2016, declaring total income of Rs. 8,00,700/- and claimed exemption u/s 10(38) of Rs. 3,82,541/- on long term capital gain received from sale of share of Syncom Formulation. Subsequently, information had been received through ITD system in respect of transactions in Penny Stock. The assessee is one of the beneficiaries of accommodation entries of bogus entry on Long Term Capital Gain during A.Y 2015-16. Thereafter, the case was reopened u/s 148 after taking necessary approval. The assessment was completed u/s 143(3) r.w.s 147 of the I.T Act on 29.12.2017 determining total income of Rs.81,53,510/-. 2. Further on perusal of the case record, it was also observed that the assessee has made following transactions in penny stock Name of the Sale value Rs. in Purchase Gain/Loss Nature of scrip gain/loss First Finstock 70,25,751 50,40,219 19,85,332 STCG 1,59,37,772 1,44,92,227 14,45,545 STCG Syncom Formulation 39,90,570 36,08,029 3,82,541 LTCG Syncom Formulation SMIL 50,06,639 80,28,573 (-)3021934 STCL Comfort Fincorp 3,43,531 3,62,153 (-)18,622 STCL Rutron Int. 3,63,313 3,54,945 8,368 STCG Total 3,26,67,576 3. However while passing the order the assessing officer has made addition of Rs 73,52,810/- with regard to accommodation entry on penny stock and unexplained commission expenses. 3.1. Subsequently, on verification of records, it is observed that in this case total sale consideration on penny stock is of Rs.3,26,67,576/- (as tabulated above),

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however while passing the assessment order the addition has been made of Rs 73,52,810/-. 3.2. Considering the above facts an amount of Rs.2,53,14,766/- (Rs.3,26,67,576 - 73,52,810) has escaped the assessment. It is also observed that the commission expense on the accommodation entry of Rs. 3,26,67,576/- has been incurred by the assessee, however the same has not been claimed in Profit and Loss Account therefore the expenditure remained unexplained. The commission expense which is of the nature of unexplained expenditure is also required to be assessed. 4. In view of the above and by reason of the failure on the part of the assessee to disclose fully & truly all material facts necessary thereto in its return of income filed for A.Y 2015-16. I have reasons to believe that income of more than Rs.1 lakhs chargeable to tax has escaped assessment within the meaning of section 147 of the I.T Act, read with explanation thereto. 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been sought from Principal Commissioner of Income Tax-17, Mumbai as per the provisions of section 151 of the Act. 6. Therefore it is clear that the Income amounting to Rs. 2,53,14,766/- and commission expenses on accommodation entry has escaped assessment per the provisions of Income Tax Act 1961 and the assessing officer has enough reason to believe that income has escaped from assessment for this year. In view of the above, provisions of clause (c) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 7. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration and assessment u/s 143(3) r.w.s 147 was made on 29.12.2017. Since 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded in Para 3 to 3.2. Hence, it is evident from the records that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/reassessment. 8. On the basis of the information available and further enquiry done, I have reasons to believe that income chargeable to tax to the extent of Rs. 2,53,14,766/- and consequential commission expense above has escaped assessment by reason of the failure on the part of the assessee to disclose fully

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and truly all material facts necessary for that assessment year i.e. for A.Y. 2015- 16 within the meaning of section 147 of the Income-tax Act, 1961.”

14.2 A careful reading of the reasons recorded leaves no scope of doubt that the very foundation of the impugned reassessment rests merely upon a subsequent verification of the existing assessment records. The Assessing Officer has nowhere recorded that any fresh information, external material or tangible evidence had come into his possession after completion of the earlier reassessment proceedings. On the contrary, the reasons themselves disclose that, according to the Assessing Officer, while framing the earlier reassessment order, additions were made only to the extent of the net long-term capital gains, short-term capital gains, short-term capital losses and related commission expenditure, whereas the entire sale consideration received on transfer of the alleged penny stock transactions ought to have been brought to tax. Thus, the sole basis for reopening is the Assessing Officer's subsequent perception that a different addition ought to have been made on the very same material which had already been examined during the earlier reassessment proceedings.

14.3 Such an exercise, in substance and effect, amounts to nothing but a review of the earlier reassessment order. It is trite law that the power conferred under section 147 is one of reassessment and not review. The provision does not authorise the Assessing Officer to reopen a concluded assessment merely because he subsequently

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forms a different opinion on the same set of facts or wishes to rectify what he perceives as an error in the earlier order. The jurisdiction under section 147 can be validly assumed only where there exists fresh tangible material having a live and rational nexus with the formation of the belief that income chargeable to tax has escaped assessment. In the absence of any such fresh tangible material, the assumption of jurisdiction under section 147 is vitiated, as it is founded solely upon a reappraisal of the material which was already available and examined in the earlier proceedings. Permitting such reopening would obliterate the well- settled distinction between the power to reassess and the power to review—a distinction consistently recognised by judicial precedents. The reasons recorded in the present case unmistakably demonstrate that no new material came into existence after completion of the earlier reassessment. The Assessing Officer has merely sought to substitute his earlier view with another on the identical set of facts, which is impermissible in law.

14.4 In view of the foregoing discussion, we hold that the assumption of jurisdiction under section 147 is without authority of law, being founded entirely upon a reappraisal of the existing assessment records in the absence of any fresh tangible material. The impugned reassessment proceedings, therefore, constitute an impermissible exercise of review under the guise of reassessment and cannot be sustained in law.

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14.5 Accordingly, the notice issued under section 148 and the reassessment order passed pursuant thereto are quashed. Consequently, Additional Ground No.1 raised by the assessee is allowed.

14.6 Since the reassessment itself has been held to be invalid, adjudication of Additional Ground No.2, challenging the reopening under the first proviso to section 147, becomes purely academic and does not call for any separate adjudication.

Order pronounced in the open Court on 20/07/2026.

Sd/- Sd/- (PAWAN SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 20/07/2026 M. Ranganath Vittal , Sr. P.S.

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Copy of the Order forwarded to :

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