LAN FINANCE PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER WARD 7(1)(4), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI“A” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.9164/MUM/2025(AY:2012-13) LAN Finance Pvt. Ltd. vs. Income-tax Officer 7(1)(4), Flat No B-603, 6th Floor Harshad Aayakar Bhavan, Mumbai-400020. Co-op. HSG. Soc. Ltd, Everad Nagar Chunabhatti (E) Mumbai-400 022 PAN/GIR No:AAACL1502F (Appellant) (Respondent) Assessee by Shri NeelkanthKhandelwal, Advocate Revenue by Shri Manoj Kumar (CIT-DR) Date of Hearing 14.07.2026 Date of Pronouncement 24.08.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assesseeemanates from the order passed u/s250

of the Income-tax Act, 1961 (in short, ‘Act’) by the National Faceless Appeal

Centre[in short, ‘CIT(A)’],dated 26.11.2025 for the assessment year (AY) 2012-

13.

“1. The Officer at the National Faceless Appeal Centre (hereinafter referred to as the CIT(A)) erred in upholding the notice issued by the Income-tax Officer 7(1)(4), Mumbai (hereinafter referred to as the Assessing Officer) under section 148 of the Act for re-opening the assessment and passing the consequential assessment order.

The appellants contend that on the facts and in the circumstances of the case and in law, the notice issued under section 148 of the Act is bad in law and thus, the consequential assessment order ought to be annulled.

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. 2. The CIT(A) erred in sustaining the addition made by the Assessing Officer of Rs 14,45,40,000, under section 68 of the Act on the ground that the sale of shares is unexplained.

The appellants contend that on the facts and in the circumstances of the case and in law, the impugned addition made by the Assessing Officer ought not to have been confirmed by the CIT(A) inasmuch as the three litmus tests to section 68 of the Act, namely, identity of the buyer of shares, their creditworthiness and the genuineness of the transaction of sale of shares stands discharged.

The appellants further contend that addition made by the Assessing Officer ought not to have been confirmed by the CIT(A) inasmuch there is gross violation of principles of natural justice in making the impugned addition.”

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. documents and also to produce the purchasers. Notices u/s 133(6) were issued to the alleged purchaser companies at the addresses available in the ROC records; however, certain notices were returned unserved. Though replies/confirmations were subsequently received from some of the parties, the AO was not satisfied with the same. He noted, inter alia, that several companies were situated at Kolkata but the replies were received through Mumbai post offices, that there were discrepancies in the addresses and signatures appearing on the documents, and that subsequent notices issued at the addresses available from the ITRs/confirmations did not elicit satisfactory responses.The AO further relied upon information obtained from the ROC and from the AOs having jurisdiction over certain purchaser companies. He noted that several of the alleged purchaser companies were operating from the common address of 6B, Bentinck Street, Kolkata and were shown as being under the process of striking off. The AO also referred to the information received from the concerned AOs regarding certain entities being involved in accommodation- entry activities. Further, an enquiry was conducted through the Ward Inspector at the assessee's address, pursuant to which the assessee was reportedly not found operating from the address mentioned in the relevant records.In view of the aforesaid circumstances, the AO held that the assessee had failed to establish the identity and creditworthiness of the purchasers and the genuineness of the share-sale transactions. Accordingly, the entire sale consideration of Rs.14,45,40,000/- was treated as unexplained credit u/s 68 of

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. the Act and added to the income of the assessee. Consequently, the total income was assessed at Rs.14,47,05,530/-.

CIT(A).The assessee challenged the reassessment proceedings initiated u/s 147

of the Act as well as the addition of Rs.14,45,40,000/- made u/s 68 of the Act.

Before the CIT(A), the assessee contended that the reopening was based merely

on information received from the Investigation Wing, Kolkata, without

independent application of mind by the AO. The reasons recorded did not

establish any live link with escapement of income. The assessee also contended

that the original assessment had already been completed u/s 143(3) of the Act

and all relevant details had been furnished at that stage. Therefore, the

reopening amounted to a mere change of opinion. The assessee also raised

objections regarding non-supply of the report of the Investigation Wing and

denial of opportunity for cross-examination.The CIT(A), however, rejected the

challenge to the reopening. He observed that the information received from the

Investigation Wing regarding the shell companies and the alleged layering of

funds constituted tangible and relevant material for formation of belief

regarding escapement of income. According to the CIT(A), the AO had

independently examined the information vis-à-vis the transactions of the

assessee and had thereafter recorded reasons for reopening. The CIT(A) further

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. noted that enquiries during reassessment revealed that several purchaser

companies were operating from common addresses, were under the process of

striking off, had meagre financial profiles and that replies to notices u/s 133(6)

contained various inconsistencies. He accordingly held that the reopening was

based on valid satisfaction and dismissed Grounds No. 1 to 9 challenging the

validity of reassessment.

4.1 On the merits, the CIT(A) considered the assessee's contention that

complete details such as confirmations, PAN, ITR acknowledgements and bank

statements of the purchasers had been furnished. However, he observed that

the sale bills were self-certified/computer-generated documents without bill

numbers, seals, stamps or acknowledgements of the purchasers; share

certificates were not physically produced for verification; and the replies

received in response to notices u/s 133(6) contained discrepancies. The CIT(A)

also noted that several purchaser companies had common addresses, were

under the process of striking off and had very meagre returned incomes

compared with the substantial amounts of shares allegedly purchased.

According to the CIT(A), the assessee had consequently failed to satisfactorily

establish the identity, creditworthiness and genuineness of the transactions. He

therefore confirmed the addition of Rs.14,45,40,000/- u/s 68 and dismissed

grounds No. 10 to 18.Thus, the appeal was dismissed with the addition u/s 68

and the validity of reassessment being upheld. 5

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the

Tribunal. At the outset, the Ld. AR for the assessee submitted that the

reopening of assessment u/s 147 of the Act was not valid in law, as it was based

merely on information received from the Investigation Wing without

independent application of mind by the AO. He contended that the reasons

recorded did not establish a live nexus between the information relied upon and

escapement of income. The Ld. AR filed copy of the reasons recorded for

reopening which is at page 3 and 4 of the paper book. The reasons for

reopening was on the basis of information received from the ADIT (Inv.), Kolkata

that the assessee has received funds from shell companies based at Kolkata

towards introduction of share capital. He referred to the audited annual

accounts enclosed in the paper book, which shows sale of non-current

investments of 21,01,075 unquoted shares for aggregate value of

Rs.14,45,40,000/-. Thus, it is a case of sale of investment and not the case of

introduction of share capital. He therefore, contended that the reasons

recorded for reopening of assessment are not in sync with the facts of the case.

Thus, there was non-application of mind by the AO while recording the reasons

for reopening the assessment. The Ld. AR, thereafter, referred to the

assessment order where the AO had concluded that the transactions of sale of

shares amounting to Rs.14,45,40,000/- from the alleged parties is unexplained

and the same was added to the total income u/s 68 of the Act. In view of the 6

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. above, the Ld. AR contended that the reasons recorded for reopening was for

introduction of share capital whereas the AO made addition towards

transaction of sale of shares. Relying upon the decision of the Hon’ble Bombay

High Court in case of CIT vs. Jet Airways (I) Ltd., 331 ITR 236 (Bom.), the Ld. AR

submitted that if the reasons recorded for reopening of assessment do not

ultimately lead to the addition made by the AO, the other addition would be

bad in law. Hence, the reopening is bad in law and the consequential order

passed is also liable to be set aside.

authorities. He submitted that the AO has validly reopened the case on the basis

of specific information received from the Investigation Wing. The appellant has

not been able to disprove the information obtained by the AO. He, therefore,

requested to upheld the order of CIT(A).

also deliberated on the decision relied upon by the Ld. AR.Ground No.1 of the

appeal pertains to validity of notice issued u/s 148 of the Act and the re-

assessment order. The undisputed facts in the instant appeal are that the return

originally filed on 27.09.2012 was subjected to scrutiny assessment and order

u/s 143(3) of the Act was passed on 18.03.2015 accepting the returned income.

Subsequently, the case was reopened on the basis of information received from

the Investigation Wing, Kolkata that the assessee had received funds from 7

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. various shell companies managed and controlled by Shri Praveen Agarwal and

Shri Akash Agarwal in the form of “introduction of share capital.” Notice u/s 148

of the Act was issued on 18.03.2019; in response to which, assessee filed return

declaring the same total income. After hearing the assessee, the AO added

Rs.14,45,40,000/- u/s 68 of the Act on account of “transaction of sale of shares”,

which was held to be unexplained. The CIT(A) has confirmed the impugned

addition in his order passed u/s 250 of the Act. During the hearing before the

Tribunal, the Ld. AR submitted has filed paper book containing 954 pages which

includes reasons for reopening, objection by the assessee, disposal of objection

and various details submitted before the AO and CIT(A). The Ld. AR submitted

that the assessee had sold 21,01,075 unquoted shares for aggregate value of

Rs.14,45,40,000/-. The Ld. AR has referred to page 63 of the paper book in

support of the sale of the unquoted shares out of the current investment. He

further stated that the quantity of the shares become Nil and the value of the

shares was also Nil during the year under consideration. Hence, this is the case

of sale of investment and not the case of introduction of share capital, as

mentioned by the AO and confirmed by the CIT(A). We have examined the

records in the light of the claim of the Ld. AR. We find that the AO has reopened

the case on the basis of information that “the assessee company has received

funds in the form of introduction of share capital.” However, in the assessment

order the AO has added “the transactions of sale of shares” amounting to 8

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. Rs.14,45,40,000/- as unexplained, which was addedto the total income of the

assessee u/s 68 of the Act. It is also seen from the computation of total income

at page 9 of the assessment order that the only addition made to the total

income was Rs.14,45,40,000/- in respect of “the transaction of sale of shares.”

No other addition was made by the AO to the total income. These facts have not

been controverted by the Ld. CIT DR by bringing any evidence on record.

Therefore, we find that the reasons recorded in reopening of the assessee did

not lead to addition made by the AO in the assessment order. Under similar

facts, the Hon’ble Bombay High Court in case of Jet Airways (I) Ltd.(supra) held

that after insertion of Explanation 3 to section 147 with effect from 01.04.2009,

section 147 of the Act has an effect that AOhas to assess or reassess income

(such income) which escaped assessment and which was the basis of formation

of belief and if he does so, he can also assess or reassess any other income

which has escaped assessment and which comes to his notice during course of

proceedings. However, if after issuing a notice u/s 148, he accepts contention of

assessee and holds that income,has, as a matter of fact, not escaped

assessment, it is not open to him to independently assess some other income.If

he intends to do so, a fresh notice u/s 148 would be necessary. In the present

appeal,the AO has not made addition of the income which was basis of

formation of belief to reopen the completed assessment. Hence, addition of the

other income,i.e., amount on account of transaction of sale of sharesis not 9

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd. permissible. The AO has also not issued any fresh notice u/s 148 of the Act to

add the consideration received on account of sale of unquoted shares. Hence,

the reopening of assessment is bad in law. The consequential reassessment

order u/s 147 is, accordingly, quashed and set aside. Ground No. 1 of the

assessee is allowed.

setting aside the reassessment order, the other ground become academic in

nature and does not require adjudication.

Order is pronounced on 24.08.2026.

Sd/- Sd/- (ANIKESH BANERJEE) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 24.08.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

ByOrder

Assistant Registrar ITAT, MUMBAI

ITA No.9164/MUM/2025 LAN Finance Pvt. Ltd.

Date Initial 1. Draft dictated on (dictation sheet is enclosed with main file.) } PS 2. Draft placed before author PS 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member.