INCOME TAX OFFICER, MUMBAI vs. ELEGAN STATIONERS, MUMBAI

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ITA 9128/MUM/2025Status: DisposedITAT Mumbai23 September 2026AY 2013-149 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 for AY 2013-14 on 27.03.2021 was indeed barred by limitation under Section 149(1)(b) of the Act, as the six-year period expired on 31.03.2020. Following the Bombay High Court's decision in The New India Assurance Company Limited, the reassessment proceedings were quashed as void ab initio. The decisions in Union of India v. Ashish Agrawal and Rajeev Bansal v. Union of India were distinguished as they dealt with notices issued after 01.04.2021. Consequently, the reassessment order for AY 2013-14 was quashed, and the Revenue's appeal for this year was dismissed. For AY 2010-11 and AY 2012-13, the Tribunal found that the AO made additions (unsecured loans and interest) that were not part of the 'reasons to believe' recorded for reopening the assessment (bogus accommodation entries). Following the jurisdictional High Court's ruling in CIT v. Jet Airways (I) Limited, where the AO does not assess the income forming the basis of 'reasons to believe', they cannot assess other income. Since the initial basis for reopening was dropped, the AO lost jurisdiction to make the subsequent additions. Therefore, these additions were deleted, and the Revenue's appeals for AY 2010-11 and AY 2012-13 were dismissed.

What were the facts?

The Revenue filed three appeals before the Income Tax Appellate Tribunal (ITAT) against the orders of the Commissioner of Income Tax (Appeals) concerning assessment years 2010-11, 2012-13, and 2013-14. The assessee, Elegan Stationers, had its reassessment orders passed by the DCIT, Central Circle-8(3), Mumbai. The appeals were consolidated for hearing due to common legal and jurisdictional issues. The assessee raised additional grounds under Rule 27 of the ITAT Rules, challenging the validity of the reopening proceedings under Section 147 of the Income Tax Act, 1961, and the additions made in the reassessment orders. The ITAT admitted these additional grounds for adjudication.

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2013-14, dated 27.03.2021, was barred by limitation under Section 149(1)(b) of the Act, rendering the reassessment proceedings void ab initio? Assessee's Contention: The notice was issued beyond the six-year period prescribed under the unamended Section 149(1)(b), which expired on 31.03.2020, making the reopening bad in law. The decision in The New India Assurance Company Limited v. Union of India was relied upon. Revenue's Contention: Not explicitly recorded. 2. Whether the additions made by the Assessing Officer (AO) in the reassessment proceedings for Assessment Year 2010-11 were sustainable in law, given that they were not part of the 'reasons to believe' recorded for reopening? Assessee's Contention: The AO dropped the additions forming the basis of 'reasons to believe' (bogus accommodation entries of ₹2,56,78,000/- and ₹1,09,00,000/-) and instead made additions on account of unsecured loans (₹15,00,000/-) and interest thereon, which were outside the scope of the reopening. The judgment in CIT v. Jet Airways (I) Limited was relied upon. Revenue's Contention: Not explicitly recorded. 3. Whether the additions made by the AO in the reassessment proceedings for Assessment Year 2012-13 were sustainable in law, given that they were not part of the 'reasons to believe' recorded for reopening? Assessee's Contention: Similar to AY 2010-11, the AO did not make additions for the alleged bogus accommodation entries (₹32,80,000/-) forming the basis of 'reasons to believe' but instead added interest expense on alleged bogus loans (₹28,70,402/-). The judgment in CIT v. Jet Airways (I) Limited was relied upon. Revenue's Contention: Not explicitly recorded.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 149(1)(b),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Respondent: Shri Sharwan Kumar Jha, Advocate
Pronounced: 23.09.2026

Heard together (3 matters)

ITA 8961/MUM/2025
ITA 8963/MUM/2025
ITA 9128/MUM/2025

Read from the judgment's own cause title. This page is filed under one of them.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: E BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 8961/MUM/2025 ITA 8963/MUM/2025 and ITA 9128/MUM/2025 (िनधा�रण वष�/Assessment Years: 2010-11, 2012-13 and 2013-14) Income Tax Officer -17(3)(1), Elegan Stationers Kautilya Bhavan, BKC 19 Janma Bhoomi Marg, Room No. 235, Bandra, Fort, Vs. Mumbai-400051, Mumbai-400001, Maharashtra Maharashtra अपीलाथ� Appellant ��थ� Respondent

PAN of Assessee: AAAFE9503C

अपीलाथ� �ारा/Appellant represented by: Smt. Sujatha Iyyanger, Sr. DR ��थ� �ारा/Respondent represented by: Shri Sharwan Kumar Jha, Advocate

सुनवाई की तारीख / Date of conclusion of hearing: 02.07.2026 घोषणा की तारीख / Date of pronouncement: 23.09.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: All these three appeals filed by Revenue are against the orders of Ld. DCIT, Central Circle – 8(3), Mumbai passed against the assessment orders by DCIT, Central Circle-8(3), Mumbai. Consolidated details of these appeals are tabulated below:

Sr. ITA No. Order of CIT(A) Assessment order Assess-ment Appeal by No. year No. Date Passed by Date Passed u/s. 1. ITA ITBA/APL/S/250/2025- 31/10/2025 DCIT, CC-8(3), 18.12.2017 143(3) r.w.s. 2010-11 Revenue 8961/MUM/2 26/1082208717(1) Mumbai 147 025 2. ITA ITBA/APL/S/250/2025- 31/10/2025 DCIT, CC-8(3), 10. 12.2019 143(3) r.w.s. 2012-13 Revenue 8963/MUM/2 26/1082208804(1) Mumbai 147 025 3. ITA ITBA/APL/S/250/2025- 31/10/2025 DCIT, CC-8(3), 30.03.2022 143(3) r.w.s. 2013-14 Revenue 9128/MUM/2 26/1082208837(1) Mumbai 147 025 2. Since common legal and jurisdictional issues are involved across these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. We first take up the Revenue's appeal in ITA No. 9128/MUM/2025 for A.Y. 2013- 14.

ITA No. 9128/MUM/2025 (Assessment Year 2013-14) 2.1. In this appeal, assessee has submitted two separate sets of applications raising additional grounds under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 (ITAT Rules) dated 02.03.2026, raising additional grounds in defence of the order appealed against by the Revenue and another dated 13.03.2026, raising additional jurisdictional grounds going to the root of the matter.

2.2. Under Rule 27 of the ITAT Rules, a respondent, though he may not have appealed against any part of the order, may support the order appealed against on any of the grounds decided against him in the court below or on any legal ground. It is a well-settled proposition across consistent tribunal jurisprudence that the respondent in an appeal before the Tribunal is entitled to raise a plea under Rule 27 supporting the ultimate conclusion of the ld. CIT(A), including challenging jurisdictional defects in the reassessment proceedings that go to the foundation of the assessment, even if such grounds were not specifically adjudicated or were decided against the assessee. Therefore, the additional grounds raised by the assessee under Rule 27 dated 02.03.2026 are admitted for adjudication.

2.3. The second set of additional grounds filed on 13.03.2026 under Rule 27, raises purely legal and jurisdictional issues challenging the validity of the reopening under Section 147 of the Act. Since all necessary facts relevant to these jurisdictional issues are already available on record and require no fresh investigation of facts, following the landmark decision of the Hon'ble Supreme Court in NTPC Ltd. v. CIT [1998] 229 ITR 383 (SC), these additional grounds are also admitted for adjudication.

3.

We first take up ground no. 4 from the set of additional grounds, which challenges the limitation prescribed under Section 149(1)(b) of the Act, contending that the notice issued under Section 148 for the assessment year under consideration i.e. A.Y. 2013-14 is barred by limitation, rendering the reopening proceedings bad in law and the consequential reassessment order void ab initio. As recorded in the assessment order in para 3, notice under Section 148 of the Act for A.Y. 2013-14 was issued to the assessee on 27.03.2021. This factual date remains undisputed and uncontroverted by the Revenue. On this undisputed factual position, the ld. Counsel for the assessee furnished detailed written submissions, highlighting that under the unamended provisions of Section 149(1)(b) as they stood prior to the Finance Act, 2021, no notice under Section 148 could be issued after the expiry of six years from the end of the relevant assessment year. For Assessment Year 2013-14, the six-year period from the end of the relevant assessment year expired on 31.03.2020.

4.

We have carefully evaluated the submissions and perused the relevant judicial precedents. The issue of limitation for notices issued under Section 148 during the extended timelines and the applicability of the old regime versus the new regime has been authoritatively settled. In the case of The New India Assurance Company Limited v. Union of India (Writ Petition No. 1945 of 2023, order dated 15.01.2024), the Hon'ble jurisdictional High Court of Bombay examined this exact legal framework. Hon'ble High Court held that for A.Y. 2013-14, the normal outer limit of six years under the pre-amended Section 149(1)(b) expired on 31.03.2020. Any notice issued under the old regime beyond this date, even if issued prior to 01.04.2021 (such as on 27.03.2021 in the present case) without meeting the statutory criteria or extending past valid boundaries cannot survive the test of limitation. The judicial precedents authored by this Bench on a similar set of facts for Assessment Year 2013-14 consistently reaffirm that where the statutory limit of six years expired on 31.03.2020, the notice issued on 27.03.2021 under Section 148 is squarely barred by limitation within the meaning of Section 149(1)(b).

4.1. We also clarify that the decisions of the Hon'ble Supreme Court in Union of India v. Ashish Agrawal [2022] 444 ITR 1 (SC) and Rajeev Bansal v. Union of India do not apply to the present set of facts. Those judgments dealt with notices issued between 01.04.2021 and 30.06.2021 under the old procedure after the new regime came into effect on 01.04.2021 via the Finance Act, 2021. In the present case, the impugned notice under Section 148 was issued on 27.03.2021, strictly prior to 01.04.2021, and must be governed strictly by the pre-amended provisions of Section 149(1)(b).

5.

Consequently, the notice issued under Section 148 on 27.03.2021 for A.Y. 2013-14 is barred by limitation within the meaning of Section 149(1)(b) of the Act. The reassessment proceedings initiated pursuant thereto are bad in law and the consequential reassessment order passed under Section 143(3) r.w.s. 147 is void ab initio and is hereby quashed. Accordingly, additional ground no. 4 raised by the assessee under Rule 27 is allowed. Since the reassessment order itself has been quashed on the jurisdictional issue of limitation, all other additional grounds raised by the assessee, as well as all the grounds of appeal raised by the Revenue in its appeal are rendered purely academic and require no separate adjudication.

6.

In the result, appeal filed by the Revenue in ITA No. 9128/Mum/2025 for A.Y. 2013-14 is dismissed.

ITA No. 8961/MUM/2025 (Assessment Year 2010-11) 7. In this appeal, assessee has similarly moved applications under Rule 27 of the ITAT Rules dated 02.03.2026 and additional grounds dated 18.03.2026. We take up additional ground no. 1 raised in application dated 18.03.2026, which goes to the root of the matter. Assessee challenges that the additions made in the impugned reassessment proceedings were not part of the "reasons to believe" recorded by ld. AO and therefore, the additions are not sustainable in law pursuant to the judgment of the Hon'ble Jurisdictional High Court of Bombay in CIT v. Jet Airways (I) Limited [2011] 331 ITR 236 (Bom).

8.

The reasons to believe recorded by ld. AO is as under: "Information was received from the Investigation Wing that the assessee firm has obtained bogus accommodation entries from entities managed and operated by entry provider Shri Vipul Vidur Bhatt. On perusal of the information, it is observed that income chargeable to tax has escaped assessment in respect of: 1. Bogus accommodation entries amounting to ₹2,56,78,000/-

2.

Bogus accommodation entries amounting to ₹1,09,00,000/- I have, therefore, reason to believe that income chargeable to tax exceeding ₹1,00,000/- has escaped assessment for A.Y. 2010-11 within the meaning of Section 147 of the I.T. Act."

8.1. A short summary of the two primary items of income alleged to have escaped assessment in the reasons to believe shows that the reopening was founded exclusively on bogus accommodation entries amounting to ₹2,56,78,000/- and ₹1,09,00,000/-. However, perusal of the assessment order reveals that the ld. AO recorded the following specific finding: "Verification of the details of accommodation entry provided. The contention of the assessee is found to be true, and hence no disallowance is called for on this issue."

8.2. Having dropped the proposed additions of ₹2,56,78,000/- and ₹1,09,00,000/- for which reasons were recorded, the ld. AO instead proceeded to make an addition of ₹15,00,000/- on account of unsecured loans from bogus entities based on the table of the assessment order, reproduced as under: Sr. No. Name of the Party Amount (Rs.)

1.

M/s Radiant Investments ₹ 10,00,000/-

2.

M/s Eager Corporation ₹ 5,00,000/-

Total ₹ 15,00,000/-

8.3. In addition, ld. AO made a separate disallowance/addition in respect of interest paid to these entities.

9.

On this factual matrix, it is undisputed that no addition was made by ld. AO in respect of the income that formed the sole basis of the "reasons to believe" (i.e., the alleged bogus accommodation entries of ₹2,56,78,000/- and ₹1,09,00,000/-). The additions actually made by the ld. AO (loans of ₹15,00,000/- and interest thereon) were completely different from the items of income recorded in the reasons to believe for reopening the assessment.

10.

The legal issue arising on the above stated factual matrix is squarely covered by the decision of the Hon'ble Jurisdictional High Court of Bombay in Jet Airways (I) Limited (supra) wherein it was held that if the Assessing Officer does not assess or reassess the income which formed the basis of the reasons to believe for reopening the assessment under Section 147, it is not open to him to assess or reassess any other income which comes to his notice subsequently in the course of the reassessment proceedings. Since the additions which formed the foundational basis for reopening were verified, found true, and explicitly dropped ("hence no disallowance is called for on this issue"), ld. AO lost jurisdiction to make any other additions.

11.

Following the binding precedent in Jet Airways (I) Limited (supra), the additions made by ld. AO are legally unsustainable and are hereby deleted. Additional Ground No. 1 raised by the assessee under Rule 27 is allowed. All other additional grounds raised by the assessee under Rule 27 are rendered purely academic and are not adjudicated upon. Consequently, the grounds of appeal raised by Revenue in its appeal are dismissed.

12.

In the result, appeal filed by the Revenue in ITA No. 8961/MUM/2025 for A.Y. 2010-11 is dismissed.

ITA No. 8963/MUM/2025 (Assessment Year 2012-13)

13.

In this appeal, assessee raised similar additional grounds under Rule 27 of the ITAT Rules challenging the validity of the additions made in the reassessment order.

13.1. As contained in the reassessment order, the reasons recorded by the ld. AO for invoking reopening proceedings under Section 147 are extracted below: "As per information available on record, the assessee firm has received accommodation entries from entities managed and controlled by entry provider Shri Vipul Vidur Bhatt. The details of the accommodation entries received by the assessee are as under:

Sr. Name of the Amount Nature of Entry No. Entity (Rs.) M/s Swetang Accommodation ₹ 1. Corporation Entry 18,50,000/- M/s Eager Accommodation ₹ 2. Corporation Entry 14,30,000/- ₹ Total 32,80,000/-

Therefore, I have reason to believe that income chargeable to tax amounting to ₹32,80,000/- has escaped assessment for A.Y. 2012-13."

14.

A perusal of the assessment order reveals that no addition whatsoever was made by ld. AO towards the amount of ₹32,80,000/- alleged to be bogus accommodation entries obtained from the entities managed by the entry provider, which formed the sole basis of the "reasons to believe". What ld. AO actually added/disallowed in the reassessment order was an amount of ₹28,70,402/- representing interest expense paid on outstanding loans, alleged to be bogus. Applying the identical reasoning and ratio of the Hon'ble Jurisdictional High Court of Bombay in Jet Airways (I) Limited (supra) as applied by us in appeal for A.Y. 2010-11 above, viz. when no addition is made in respect of the income escaping assessment as recorded in the reasons to believe, the ld. AO cannot make additions on account of any other income (such as interest expense of ₹28,70,402/-). The additional ground raised by the assessee under Rule 27 in this regard is accordingly allowed. All other additional grounds raised by the assessee are rendered academic and need no separate adjudication. Consequently, the grounds of appeal raised by the Revenue are dismissed.

15.

In the result, appeal filed by Revenue in ITA No. 8963/Mum/2025 for A.Y. 2012-13 is dismissed.

16.

In the result, all three appeals filed by the Revenue in ITA Nos. 9128/Mum/2025, 8961/Mum/2025, and 8963/Mum/2025 are dismissed.

Order pronounced in the open court on 23 September, 2026.

Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 23 September, 2026 MP, Sr. PS Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai

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