SHIKHAR TRADERS PRIVATE LIMITED,MUMBAI vs. WARD 3(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.7480/Mum/2025 (Assessment year: 2015-16) ITA No.7481/Mum/2025 (Assessment year: 2016-17)

Shikhar Traders Pvt. Ltd. vs ITO Ward 3(3)(1),Mumbai 513, Raheja Centre, Free Press Aayakar Bhavan, Maharshi Karve Journal, Marg, Nariman Point Road, New Marine Lines, Mumbai- Mumbai-400021 400020 PAN:AAFCS6942R APPELLANT RESPONDENT Assessee by : Shri Dharan Gandhi, Adv. & Ms. Vinita Nara Advocate Revenue by : Shri Arun Kanti Datta(CIT DR) Date of hearing : 08/05/2026 Date of pronouncement : 15/05/2026 O R D E R Per:Anikesh Banerjee (JM): Both the appeals pertains to the same assessee filed against the orders of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Years 2015-16 and 2016-17, date of both the orders 03.11.2025. The impugned order emanated from the order of the National Faceless Assessment Centre, Delhi (for brevity the

2 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. ‘Ld. AO’) order passed under section 147 r.w.s.144B of the Act date of order 29.03.2022 for both the assessment years. 2. Both the appeals pertain to the same assessee and arise out from common legal grounds. For convenience both the appeals are taken together, heard together and disposed of by the common order. ITA No.7480/Mum/2025 is taken as lead case and the decision rendered therein shall be applied mutatis mutandis to the other appeal. ITA No.7480/Mum/2025 A.Y. 2015-16 3. The Ld. AR challenged the jurisdiction for reopening u/sec. 147 of the Act for issuance of notice u/sec. 148 of the Act. The Ld. AR invited our attention in the impugned assessment order page no.2 where the assessee is reproduced the recorded reasons for reopening of the assessment. The relevant observations of the Ld. AO in page no.2 are reproduced as below: “The assessee company has filed return of income on 27.09.2015 for AY 2015-16 declaring total losses atRs. 23,59,860/-. The said return was proceeded u/s. 143(1) on 30.11.2017. 2 During the year, as per information uploaded on Insight Portal, received in the office of the ITO-3(3)(1), Mumbai on 26.03.2021, it has been informed for the financial year 2014-15 relevant to AY 2015-16, that the assessee company has done trading in shares amounting to Rs.26,59,55,152/- and has also received rent amounting to Rs.93,72,932/-, The sources of income for investment are not known. 3 In view of the above facts and circumstances of the case and material on record, I have reasons to believe that income chargeable to tax exceeding Rs.1 lakh has escaped assessment for the A.Y. 2015-16 within the meaning of sec 147 of the Income tax Act owing to failure on part of the assessee to furnish all material facts fully and truly for assessment in the case of assessee. Therefore, the assessee has failed to disclose fully and truly all material facts necessary for assessment and, therefore, the case of the assessee for A.Y. 2015-16 is being re-opened u/s 147 of the L.T. Act, to bring to tax the income escaping assessment and also any other income chargeable to tax which has escaped assessment which comes to

3 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. notice subsequently in the course of proceedings for assessment for A.Υ. 2015-16. Accordingly, this is a fit case for re-opening of assessment by issuing notice u/s148 of the Income Tax Act, 1961. 4. For the above reasons, it is not a case of change of opinion by the AO. The facts of the case are covered by Explanation 2 (a) to Section 147 of the IT Act, where the assessee has not filed return of income but during the relevant previous year income exceeding the amount which is chargeable to tax has escaped assessment in the case of Assessee Company for the AY 2015-16 as elaborated above. The requirements to initiate proceeding u/s. 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failureon the part of the assessee to disclose fully and truly all material facts necessary for Its assessment for the A.Y. 2015-16. 2. After recording the reasons and taking necessary approval from the Competent Authority, notice u/s 148 of the Act dated 31/03/2021 was issued to the assessee through ITBA Portal. In response to the notice u/s 148 of the Act, the assessee filed its Income Tax Return on 16.04.2021 declaring total Loss of Rs. 23,59,860/-. Notice u/s 143(2) of the Act was issued to the assessee on 07.06.2021. Notices u/s 142(1) of the Act was issued to the assessee time to time as per date mentioned in the table above requesting to file details. Assessee made online submissions from time to time which are available in the ITBA portal and are discussed in subsequent paras.” 4. The Ld. AR contended that the Ld. AO had never been cited any reference related to the assessment framed by the Ld. AO u/sec 143(3) of the Act date of order 29.11.2017. The relevant part of the original assessment order dated 29.11.2017 is reproduced as below: “4. The assessee is stated to be in the business of trading of derivatives of shares (F&O). 5. The assessee has shown house property income at Rs.51,17,630/-. During the course of assessment proceedings, assessee vide letter dated 2.11.2015 submitted that an amount of Rs.5 lakhs being brokerage on rentalIncome was inadvertently reduced from the rent received for the calculation. of house property income. Hence, the amount of Rs.5 lakhs is added to the calculation of house property Income. The house property income is worked as under: Rent as per computation of income 73,12,000 Add: Brokerage 5,00,000 78,12,000 Less: Municipal taxes 1,100 Less: Deduction @ 3 % 23,43,270 House Property Inocme: 54,67,630

4 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. Penalty proceedings u/sec. 271(C) are initiated separately for furnishing inaccurate particulars of income.”

5 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. well as going through the return of income filed. This has been held by various High Courts, including the jurisdictional Bombay High Court, to be bad in law.

2.1. The reasons recorded primarily state in para 2... "the assessee company has done trading in shares of Rs. 26,59,55,152 and also received rent amounting to Rs. 93,72,932. The source of income for investment is not known." Merely because there are transactions of trading in shares and receipt of rental income cannot give rise to any belief that income has escaped assessment. Moreover, the assessee has already offered rental income as income from house property and has offered it to tax. Therefore, there is no live link or nexus between the information received and the fact that income has escaped assessment. Reliance in this respect was placed on the decision of the Mumbai Tribunal in the case of Abdul Hamid Abdul Majid Nathani (relevant paragraphs 10, 11 and 12) in ITA No. 2528/Mum/2024.

3.2. Thus, this is a clear case of change of opinion. Therefore, the proceedings are bad in law. Reliance is placed on the decision of the Supreme Court in the case of Kelvinator of India Ltd. reported in 320 ITR 561.

3.3. In this regard, reliance is placed on the decision of the Bombay High Court in the case of Feng Shui Realtors reported in 475 ITR 447 (paras 6 to 9). In this case also, the Bombay High Court held that since there was no failure to disclose truly and fully all material facts, the reassessment order was bad in law. It is pertinent to note that this case also deals with Assessment Year 2015-16, and here also the notice was dated 31st March 2021.

6 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. 4.1. On two aspects, assessment was reopened trading in shares (total Rs. 26,59,55,152) and rental income (Rs. 93,72,932). 4.2. The addition made was of Rs. 5,31,952 in respect of rental income in para 3.2 of the assessment order. This was deleted by the learned CIT(A) in para 8.5.4.1 on page 49 of the appellate order. No appeal has been filed and this has been accepted. 4.3. No addition was made in respect of trading in shares. On the contrary, in the assessment order, an addition was made in respect of disallowance of net loss of Rs. 35,78,435 from F&O transactions. See page 10 of the assessment order. F&O transactions i.e., derivative transactions are different from dealing in shares.

4.4. Thus, in respect of the reasons recorded, firstly, no addition has been made in respect of trading in shares. The addition made in respect of rental income has been deleted and the Department has not filed any appeal. Therefore, none of the issues which form part of reopening are surviving today for consideration and therefore, as per the decision of Jet Airways and the decision of the Delhi High Court in the case of CIT v. Adhunik NirvatIspat Ltd. reported in 63 DTR 212 (para 1 and 3), all other additions are bad in law. 5. Fishing and roving inquiries are not permissible.

5.1. The main crux of the reasons is the last line of para 2, which says that "sources of income for investment are not known". This clearly means that the Assessing Officer wants to make inquiry regarding sources of income for investment. This is impermissible under the guise of section 148. It is settled law that an assessment cannot be reopened for the purpose of making fishing and roving enquiries.”

7 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. 3. Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. This issue has been decided by the High Court of judicature at Bombay in CIT vs. Jet Airways (1) Ltd. (2011) 239 CTR (Bom) 183 : (2011) 52 DTR (Bom) 71 vide judgment dt. 12th April, 2010 in IT Appeal Nos. 1714 of 2009 and 1526 of 2008 [reported at]. Recently, this Bench has also delivered the judgment in case of Ranbaxy vs. CIT Ranbaxy Laboratories Ltd. vs. CIT (2011) 242 CTR (Del) 117: (2011) 57 DTR (Del) 281 decided on 3rd June, 2011 [reported at] agreeing with the aforesaid view taken by High Court of judicature at Bombay. We thus find that no substantial question of law arises in this appeal. Dismissed.”

8 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by Petitioner that the approval granted suffers from non- application of mind. Paragraph 24 of German Remedies Ltd. (supra) reads as under:"24 It is not in dispute that the Assessing Officer on 15-92003 had himself carried file to the Commissioner of Incometax and on the very same day, rather same moment in the presence of the Assessing Officer, the Commissioner of Incometax granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of 4 years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. In the above view of the matter, the impugned notices and consequently the order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside."

9 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. the AO had not even bothered to check what the 'transaction' with the specific entity had been and had simply relied upon the findings of DG GST.

 However, in the instant case, the AO has clearly compared the information received (i.e. the receipt of rent and the trading in shares), with the loss returned by the assessee in the return of income. He has also mentioned thefact that the source of such investment is not known. Thus, on application of mind, he has derived the satisfaction that the case deserved reopening.

 In this case, the AO reopened assessment on the basis of receipt from one Mr. KassamSupariwala, whereas addition was finally made on the receipt from Mr. Nadeem Supariwala.

 The ITAT allowed the appeal since the final addition was not the reason on which reopening was made, following Jet Airways (2011) 321 ITR 236 (Bom.).

 In the instant case however, addition has been made on both the issues on which reopening was made. Further, addition on one of these two grounds has also been upheld by Ld. CIT(A).

 As mentioned earlier, the AO has clearly compared the information received (i.e. the receipt of rent and the trading in shares), with the loss returned by the assessee in the return of income. Thus, he has drawn a link between the tangible material with the belief that escapement may have occurred, after due application of mind, as required in the quoted ITAT order at para 11.

Accordingly, it is prayed that none of the quoted case laws apply to the facts of the instant case and cannot be relied upon, and that the reopening has been done in accordance with law. Further, the Ld. AR has also relied upon a case law, relying upon it to state that since one of the two grounds on which the reassessment was made, was deleted by CIT(A), the reopening cannot survive. The same is rebutted below:

 In this case, reopening was made on ground of bogus share capital. AO made addition on this ground, along with some other additions.

10 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd.  CIT(A) deleted other additions, but confirmed bogus share capital.  The ground of bogus share capital (sole ground on which reopening was made), was deleted by Tribunal. Order of CIT(A) deleting other additions was also upheld.  Department contested deletion of other additions (and not the ground of reopening, i.e. bogus share capital).  Thus, Hon'ble High Court held that since the original grounds of reassessment do not survive, the other additions also cannot survive.  However, in the case of the taxpayer, the AO has reopened on two grounds -rental income and share trading. Addition was made on both grounds. CIT (A) has also confirmed one ground (i.e. share trading). Accordingly, the reasons for reopening are still surviving and the quoted case law cannot apply. Accordingly, it is prayed that none of the quoted case laws apply to the facts of the instant case and cannot be relied upon, and that the reopening has been done in accordance with law.”

11 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. 29.11.2017. In the said assessment order, the Ld. AO had specifically recorded that the assessee was engaged in the business of trading in derivatives and shares. Further, the rental income disclosed by the assessee was also examined during the original assessment proceedings and an addition of Rs.5,00,000/- was made while computing the income from house property. Thus, both the issues forming the basis of reopening, namely trading in shares/derivatives and rental income, were already examined during the original scrutiny assessment proceedings. We further find merit in the contention of the Ld. AR that while recording the reasons for reopening, the Ld. AO failed to take note of the fact that an assessment u/sec. 143(3) had already been completed in the case of the assessee. The reasons recorded proceed on an erroneous factual premise and even invoke Explanation 2(a) to section 147 by observing that no return was filed, whereas admittedly the assessee had filed its return of income and the same was subjected to scrutiny assessment. This itself demonstrates complete non- application of mind on the part of the Ld. AO while recording reasons for reopening. 10. We respectfully rely upon the judgment of the Hon’ble Bombay High Court in the case of Feng Shui Realtors (P.) Ltd. (supra) wherein the Hon’ble Court held that reopening based on incorrect factual assumptions and without verifying the assessment records amounts to non-application of mind and renders the reopening invalid in law. The facts of the present case are squarely covered by the aforesaid judgment. We also find that the reopening has been initiated merely on the basis of information received from the Insight Portal without there being any fresh tangible material establishing escapement of income. The issues relating to trading in derivatives/shares and rental income were already subject matter of

12 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. examination in the original assessment proceedings. Therefore, reopening on the very same material amounts to a mere change of opinion, which is impermissible in law. In this regard, we respectfully rely upon the judgment of the Hon’ble Supreme Court in CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). Further, we find that though the reopening was initiated on two issues, namely share trading and rental income, no addition ultimately survives on the issues forming the reasons recorded for reopening. The addition relating to rental income was deleted by the Ld. CIT(A) and no further appeal has been preferred by the revenue. Further, no addition was made in respect of share trading as contemplated in the reasons recorded. Thus, the very foundation of reopening no longer survives. Respectfully following the judgment of the Hon’ble Bombay High Court in Jet Airways (I) Ltd. (supra) and the judgment of the Hon’ble Delhi High Court in Adhunik Niryat Ispat Ltd. (supra), we hold that once the additions forming the basis of reopening do not survive, no other addition can independently survive in reassessment proceedings. 11. The contentions advanced by the Ld. DR do not persuade us, as the reassessment proceedings suffer from inherent jurisdictional defects arising from non-application of mind, absence of fresh tangible material, and clear change of opinion. Accordingly, we hold that the assumption of jurisdiction u/sec. 147 of the Act and issuance of notice u/sec. 148 of the Act are bad in law and liable to be quashed. Consequently, the reassessment order passed by the Ld. AO stands quashed. Since we have allowed the appeal on the legal issue challenging the validity of reopening, the grounds raised on merits have become academic in nature and therefore do not require separate adjudication.

13 ITA Nos.7480 and 7481/Mum/2025 Shikhar Traders P. Ltd. 12. In the result, the appeal of the assessee bearing ITA Nos.7480 and 7481/Mum/2025 are allowed. Order pronounced in the open court on 15th day of May 2026. Sd/- Sd/- (PRABHASH SHANKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 15/05/2026 SAUMYASr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI