K2 VC LLC,USA vs. DEPUTY COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION, CIRCLE DDIT/ADIT (IN TAX.), NOIDA, NOIDA

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ITITA 231/DEL/2026Status: DisposedITAT Delhi07 August 2026AY 2020-214 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the impugned addition of unexplained investment is not sustainable in law. The primary reason for reopening the assessment, as recorded by the Assessing Officer, was the purchase of shares of One 97 Comm Private Limited through an SPA from Mountain Capital Fund LP. However, the addition ultimately made was for shares acquired through direct subscription. This significant divergence between the reason for reopening and the actual addition made, which was not rebutted by the revenue, rendered the reopening invalid. The Tribunal relied on various High Court judgments, including ATS Infrastructure Ltd. Vs. ACIT, Ranbaxy Laboratory CIT, PCIT v. Jakhotia Plastics (P.) Ltd., CIT Vs. Jet Airways (I) Ltd., and CIT(E) Vs. BP Poddar Foundations for Education, to conclude that a reopening not leading to an addition based on the recorded reasons is not sustainable. Consequently, the reopening and the consequent addition were quashed. All other pleadings on merits were rendered academic.

What were the facts?

The assessee, K2 VC LLC, is an appellant before the Income Tax Appellate Tribunal (ITAT) Delhi Bench 'D' for Assessment Year 2020-21. The appeal challenges the final assessment order dated 17.01.2026 passed by the Deputy Commissioner of Income Tax (International Taxation), Noida (DCIT(A)), pursuant to directions from the Dispute Resolution Panel (DRP). The proceedings were under section 144C(13) read with section 143(3) of the Income Tax Act, 1961. The reopening was initiated based on information that the assessee purchased 1,15,271 shares of One 97 Comm Pvt. Ltd. through a Share Purchase Agreement (SPA) from Mountain Capital Fund LP, valued at Rs. 1,23,95,54,128/-. The assessee denied this investment. Subsequently, the Assessing Officer (AO) changed his stance and proposed to add Rs. 71,49,78,000/- as unexplained investment under section 69 for shares acquired through direct subscription.

What were the issues?

1. Whether the impugned addition of unexplained investment is sustainable in law, given that it is not based on the sole reason recorded for reopening the assessment? (Question of law and fact, concerning Section 147/148A of the Income Tax Act, 1961). Assessee's Contention: The assessee argued that the addition made by the AO was not based on the reason recorded for reopening. The reopening was initiated based on the purchase of shares through SPA from Mountain Capital Fund LP, whereas the addition was made for shares acquired through direct subscription. This factual discrepancy, which remained unrebutted by the revenue, renders the reopening unsustainable. Revenue's Contention: The judgment records no specific argument from the revenue on this issue, other than implicitly supporting the AO's actions leading to the assessment order.

Which sections of the Income-tax Act were involved?

Section 144C(13),Section 143(3),Section 148A,Section 148A(b),Section 148A(d),Section 148,Section 144C(1),Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI

Before: SHRI SATBEER SINGH GODARA

For Respondent: Dr. Shalini Verma, CIT(DR)
Hearing: 30.07.2026Pronounced: 07.08.2026

This assessee’s appeal for Assessment Year 2020-21 arises against the Deputy Commissioner of Income Tax(International Taxation) (for short, ‘DCIT(A)’), Noida’s final assessment order dated 17.01.2026 passed in DIN & order No. ITBA/AST/S/147/2025-26/1084883899 (1), framed in consequence to the Dispute Resolution Panel-2 (“DRP”), New Delhi’s directions dated 30.12.2025, involving proceedings u/s 144C(13) r.w.s. 143(3) of the Income Tax Act, 1961; hereinafter referred to as, “the Act”.

2 Heard both the parties at length. Case file perused. 2. It transpires during the course of hearing with the able assistance coming from both the parties that there arises the first and foremost legal issue of validity of the impugned reopening itself. A perusal of the case file indicates that the assessee has placed on record the learned Assessing Officer’s section 148A(b) notice dated 10.03.2024; along with the relevant annexure(s) as well as the verification particulars forming its part, at pages 2 to 7 of the paperbook, wherein the sole issue raised was that “the assessees has not filed ROI but has purchased 1, 15, 271 shares of One 97 Comm Pvt. Ltd. through SPA” having value of Rs. 1,23,95,54,128/-“. There is no dispute between the parties that the learned assessing authority had taken note of the relevant details coming from M/s Mountain Capital Fund LP claiming sale of shares to the assessee whilst declaring its capital gains.

3.

Learned counsel at this stage invites the tribunal’s attention to the assessee’s paperbook at page 11 compiling its reply dated 25.03.2024 contesting any such investment in shares/securities of the aforesaid entity through M/s Mountain Capital Fund Pvt. Ltd. along with the latter’s confirmation duly confirming the same.

3 4. Suffice to say, the Assessing Officer thereafter pressed his section 148A(d) order dated 31.03.2024 concluding therein that the assessee investments represented its income liable to be assessed to the tune of Rs. 1,23,95,54,128/- (pages 15 to 17). He thereafter issued section 148 notice dated 31.03.2024 in very terms which leading to framing of the draft assessment order u/s 144C(1) of the Act. This time, the learned Assessing Officer changed his stand and proposed to add the assessee’s investments of Rs. 71,49,78,000/- in 39,280 shares of One 97 Comm. Pvt. Ltd. for Rs. 71,49,78,000/- by way of ‘subscription’, as unexplained investments u/s 69 of the Act. Learned dispute resolution panel “DRP” also confirmed the same in the assessee’s objections as well. And that the learned Assessing Officer has thereafter framed his final assessment dated 17.01.2026 making the aforesaid addition of Rs. 71.49 crores which forms the sole subject matter of the tribunal’s apt adjudication herein.

5.

It is in this factual backdrop that we now advert to the assessee’s first and foremost legal argument that the impugned unexplained investment addition is not based on the sole reopening reason recorded at the Assessing Officer’s behest. We deem it appropriate to observe at the cost of repetition that the learned Assessing Officer had admittedly set into motion the impugned proceedings in the assessee’s case that it had

4 purchased 1,15,271 shares of One 97 Comm. Private Limited through SPA i.e., Mountain Capital Fund LP whereas the addition made herein is that of shares acquired through direct subscription only. This clinching factual position has gone unrebutted from the Revenue side during the course of hearing. We thus conclude in this factual backdrop in light of ATS Infrastructure Ltd. Vs. ACIT (2024) 166 taxman.com 61 (Delhi), Ranbaxy Laboratory CIT (2011) 335 ITR 136 (Del), PCIT v. Jakhotia Plastics (P.) Ltd. (2018) 94 taxmann.com 89 (Delhi), CIT Vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom.) and CIT(E) Vs. BP Poddar Foundations for Education (2023) 148 taxmann.com 125 (Cal) that such a reopening not making any addition qua the reasons recorded; is not sustainable in law which is hereby quashed in very terms. Ordered accordingly. All other remaining pleadings between the parties on merits stand rendered academic.

6.

This assessee’s appeal is allowed.

Order pronounced in the open court on 07.08.2026. Sd/- Sd/- (AMITABH SHUKLA) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07.08.2026 *Pooja Mittal, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR

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