RAJESH GUPTA HUF,DELHI vs. ACIT CIRCLE 28(1), NATIONAL FACELESS ASSESSMENT CENTRE

PER MANISH AGARWAL, A.M.: The present appeal is filed by assessee against the order dated 08.10.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2014-15/10107224 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 14.12.2017 passed u/s 143(3) of the Act pertaining to Assessment Year 2015-16.

ITA 8238/DEL/2025 RAJESH GUPTA HUF transactions in shares and exempt Long Term Capital Gain (“LTCG”) shown in return. Thereafter, notice u/s 143(2) of the Act was issued on 20.09.2016 followed by various notices issued u/s 142(1) alongwith questionnaires which were duly replied. The AO after considering the submissions made by the assessee, passed the assessment order u/s 143(3) of the Act dated 14.12.2017 at a total income of INR 54,59,110/-. Thereafter, based on the information received from the Investigation Wing, Ahmedabad, the case of the assessee was re-opened by issue of notice u/s 148 on 31.03.2021. In response, the assessee filed return of income of INR 48,69,080/- i.e. income finally assessed u/s 143(3) of the Act after the order of ld. CIT(A). The AO alleged that the assessee has shown capital gain of INR 14,08,915/- from the sale of 10,000 shares of Safal Herbal Ltd. which is a penny stock company and made the addition of the entire sale consideration of INR 31,17,000/- u/s 68 of the Act.

ITA 8238/DEL/2025 RAJESH GUPTA HUF 6. Ld.AR for the assessee submits that during the original assessment proceedings, complete details with respect to purchase of shares and payments made for purchase of shares, copy of DEMAT and copy of sales bills of the brokers were submitted. After considering all these details, the AO was of the view that the transactions of shares of Safal Herbal Ltd. were genuine and only doubted the sale of shares of M/s. Eins Eductech Limited for which addition of INR 22,23,964/- was made. Ld. AR submits that in terms of the provision of section 147 of the Act as existed during the relevant period, the proviso says that no action could be taken after the expiry of 04 years where the assessment was completed u/s 143(3) without recording the satisfaction of the failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. Ld.AR submits that once all the information was filed and was examined thereafter, the AO has incorrectly observed that the assessee has not disclosed all the material facts. These facts were brought to the notice of ld. CIT(A) and ld. CIT(A) while disposing the appeal of the assessee in para 4.2 of the order has incorrectly observed that no assessment was framed u/s 143(3) of the Act and no opinion was ever framed by the AO thus, there was no change of opinion. Ld.AR submits that such observations of ld. CIT(A) are contrary to the facts on record that the assessment was already completed u/s 143(3) of the Act which facts was admitted by the Ao himself in the reason recorded placed at pages 132 to 150 of the Paper Book and also observed in para 1 of the re-assessment order. Ld. AR thus, submits that once the issue of sale of shares and claim of exempt income u/s 10(38) of the Act has already examined and all the material facts were available on record therefore, re-opening of assessment based on the same facts deserves to be hold bad in law and consequent order be quashed. He placed reliance on the judgment of Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC) and in the case of Calcutta Discount Co. Ltd. vs ITO reported in [1961] 41 ITR 191 (SC). He also placed reliance on the following judgments:-

ITA 8238/DEL/2025 RAJESH GUPTA HUF ➤ German Remedies Ltd vs. DCIT [2006] 287 ITR 494 (Bom) ➤ CIT vs. Foramer France [2003] 264 ITR 566 (SC) ➤ Tata Business Support Services Ltd. v. Dy. CIT [2015] 232 Taxman 702 (Bom) ➤ Tirupati Foam Ltd. v. Dy. CIT [2016] 380 ITR 493 (Guj) ➤ Gujarat Eco Textile Park Ltd. v. ACIT [2015] 372 ITR 584 (Guj) ➤ Nirmal Bang Securities (P) Ltd. v. ACIT. [2016] 382 ITR 93 (Bom)

ITA 8238/DEL/2025 RAJESH GUPTA HUF information with respect to the LTCG declared by the assessee claimed as exempt which includes the bills and vouchers of all the shares sold during the year and inter-alia includes the details of sale of share of Safal Herbal Ltd. Thereafter, AO believed M/s. Eins Eductech Limited was a penny stock script and the LTCG earned from the sale of shares and claimed as exempt u/s 10(38) of the Act was added back to the income of the assessee. It is further observed that ld. CIT(A) while deciding the appeal of the assessee incorrectly, observed in para 4.2 of its order that no assessment was passed u/s 143(3) of the Act and therefore, no material was available with respect to transactions carried out in the case of Safal Herbal Ltd. Such observations are totally misplaced as the case of the assessee was taken up for scrutiny and after considering the facts of the case, AO has made the addition for the penny scrip of M/s. Eins Eductech Limited and no adverse inference was taken with respect to sale of shares of Safal Herbal Ltd. It is observed that out of the total LTCG of INR 3,24,06,320/- claimed as exempt u/s 10(38) of the Act, after examination of the facts and details filed, the AO had accepted the LTCG of INR 3,01,82,356/- as exempt income u/s 10(38). The Full Bench of the Delhi High Court in CIT vs. Kelvinator of India Ltd. Reported in 256 ITR 1 held that "Section 147 of the Act does not postulate conferment of power upon the assessing officer to initiate reassessment proceedings upon his mere change of opinion." The Full Bench of the Delhi High Court also taken into consideration the Circular No. 549 dated 31.10.1989 issued by CBDT explaining the scope of amended section 147 of the Act which reads as under: "7.2 Amendment made by the Amending Act, 1989 to reintroduce the expression "reason to believe" in section 147 A number of representations were received against the omission of the words "reason to believe" from section 147 and their substitution by the "opinion" of the Assessing Officer. It was pointed out that the meaning of the expression, "reason to believe" had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new section 147, however, remain the same."

ITA 8238/DEL/2025 RAJESH GUPTA HUF 8.1 The hon’ble Court at page 18 of the judgment held as under : "From a perusal of Clause 7.2 of the said Circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out i.e. only with a view to allay the fears that the omission of the expression "reason to believe" from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment." In that case, the assessee had withdrawn the disallowance in respect of expenditure on rent and depreciation of the guest house in the revised return of income, on the ground that since rent and depreciation were allowable under sections 30 and 32 respectively, the same could not be disallowed under section 37(4) of the Act. The assessing officer in the original assessment accepted the withdrawal of disallowance of guesthouse expenses as submitted in the revised return of income. Thereafter, notice under section 148 of the Act was issued to disallow expenditure on maintenance of guesthouse inclusive of rent and depreciation. The counsel for the Revenue submitted before the Full Bench of the High Court that reassessment was based on the information derived from the tax audit report, which had not been noticed by the Assessing Officer passing the original assessment. Repelling the contention put forth by the counsel for the Revenue, the Full Bench of the Delhi High Court observed as under: "We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the Assessing Officer had received information from an audit report which was not before the ITO, but it is another thing to say that such information can be derived by the material which had been supplied by the assessee himself. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub- section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section 3 of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in term of clause (e) of section 114 of the Indian Evidence Act the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to re-open the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong." (Emphasis supplied)

ITA 8238/DEL/2025 RAJESH GUPTA HUF 8.2 The aforesaid decision of the Hon’ble Delhi High Court has been affirmed by the Supreme Court in CIT vs. Kelvinator of India Ltd. Reported in 320 ITR 561 (SC). The relevant observations of the Court are as under: "On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post- 1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." (Emphasis supplied). 9. Further in the case of Usha International Ltd. reported in 348 ITR 485 (Del. HC), the Hon’ble Jurisdictional High Court has held that “re-assessment proceedings could not be validly in relation to the issues which were raised, discussed and duly though upon by the assessing officer during the original assessment proceedings, since the same is hit by the principle of change of opinion”.

ITA 8238/DEL/2025 RAJESH GUPTA HUF documents already filed by the assessee has re-opened the assessment which is nothing but mere change of opinion. Accordingly, we hold that completed assessment cannot be re-opened for making roving and fishing inquiry or investigation when all the facts were available on record. Thus, Grounds of appeal Nos. 1 to 3 raised by the assessee are allowed.

Order pronounced in the open court on 25.09.2026. Sd/- Sd/-

(VIMAL KUMAR) (MANISH AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Date- 25.09.2026 *Amit Kumar, Sr. P.S* Copy to: RAJESH GUPTA HUF, 1 HOUSE NO. 41, STREET NO. 3 SHANTI NIKETAN, MOTI BAGH, NEW DELHI-110021 2 ACIT CIRCLE 28(1), CIVIC CENTRE NEW DELHI-110002 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR I.T.A.T., DELHI