PRAMOD BAHL,ANAND VIHAR vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -6, DELHI, DELHI

Before us, both the parties have fairly admitted that the issues involved in both appeals of the assessee are common and therefore, both the captioned appeals are taken together and decided by common order.

First, we take appeal of the assessee in ITA No.6734/Del/2025 for Assessment Year 2016-17 in the case of Pramod Bahl.

Aggrieved by the said order, the assessee is in appeal before ld. CIT(A) wherein it was the claim of the assessee that all the facts were fully and truly disclosed which were necessary for the assessment before the AO, therefore, no new fresh material was brought on record based on which proceedings u/s 148 could be initiated. However, ld. CIT(A) has rejected the claim of the assessee and confirmed the additions vide impugned order dated 22.08.2025.

Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking following Grounds of appeal:-

Ground of appeal No. 7 taken by the assessee was not pressed, therefore the same is dismissed.

Ground of appeal Nos. 1 to 6 & 8 to 9 raised by the assessee are related to the re-opening u/s 147 of the Act therefore they are taken first for the consideration.

Before us, Ld. AR submits that a search and seizure action was carried out in the case of assessee alongwith SMC Group on 20.07.2022 and resident of the assessee was also searched. During the course of search, one handwritten paper was found, containing date-wise sales of shares of Goldline International Finvest Ltd. As per the ld. AR, the transactions found noted in the said sheet was duly recorded in the books of accounts of the assessee. The entries in the said paper contained the date of sale, number of shares sold, cost price, commission/brokerage, STT etc. which was alleged by the AO as the commission paid to obtain the accommodation entries of bogus LTCG and based on such satisfaction proceedings u/s 147 of the Act were initiated by issue of notice u/s 148 after passing the order u/s 148A(d) of the Act. Ld. AR submits that during the proceedings u/s 148A, in reply to the information supplied, assessee had filed complete details of purchases of shares, copy of share allotment certificates, DEMAT Account statement and copies of the bills issued by the broker for the sale thereof. It was the submission that all the figures found noted in the seized documents are matched with the transactions of purchase and sale of shares which were duly recorded in the books of accounts. It was submitted by ld.AR that since the transactions of sales of shears were duly recorded in the books of accounts and thus were not incriminating in nature. He drew our attention to the order passed u/s 148A(d) dated 25.04.2023 wherein the AO in para 2.5 of the order has stated that the information was available in the case of M/s. Goldline International Finvest Ltd. That the said company was used for providing accommodation entries of long terms capital gains. Ld. AR submits that order of SEBI is referred which was passed on 27.04.015 and thus, this report was available when the assessment proceedings were concluded u/s 153C of the Act where all the transactions of purchases and sales of shares were examined by the AO and no adverse inference was called for. As per ld. AR, even otherwise, no fresh material was brought on record by the AO before initiating the proceedings u/s 147 of the Act and based on the information already available with the AO, satisfaction of escapement of income was recorded which is nothing but mere change of opinion. Ld. AR submits that the AO had invoked the provisions of section 149(1)(b) of the Act which could be applied when the AO has in his possession books of accounts or other documents which suggests that income chargeable to tax represented in the form of asset or expenditure exceeding INR 50.00 lacs has escaped assessment. As per ld.AR, the loose paper relied upon by the AO for reaching to such conclusion found during the course of search contained details of the transactions of sale of shares of Goldline International Finvest Ltd. which are duly recorded in the books of accounts and all the relevant evidence of such transactions were submitted during the course of assessment proceedings completed u/s 153C of the Act. For this, ld.AR drew our attention to the query letter and reply filed during the course of assessment proceedings completed u/s 153C of the Act wherein vide notice dated 18.10.2022 issued u/s 142(1) of the Act, the AO has asked the assessee to file all the relevant details of share transactions which were duly replied by the assessee in terms of letter dated 10.12.2022 placed at pages 03 to 24 of Paper book (PB). Ld. AR drew our attention to Point No.9 of the reply wherein transactions of sale of share of M/s. Goldline International Finvest Ltd. were reported and the AO after examining all the facts, has accepted the income declared by the assessee in the return of income filed. As per ld.AR, no new and fresh material was brought in record which was come into the possession as a result of search and merely referred the loose paper containing details of transaction which were duly recorded in the books of accounts and declared in the return of income filed. Therefore, based on such loose paper, no proceedings could be initiated u/s 148 of the Act. Ld.AR submits that while re-opening the assessment, AO has not referred any fresh material which was subsequently came into his possession and based on the disclosed transactions, proceedings cannot be initiated as per the provisions of section 149(1)(b) of the Act. For this, he placed reliance on the decision of Co-ordinate Bench in the case of DCIT vs Malhotra Cables Pvt. Ltd. in ITA No. 1317 to 1324/Del/2025 & Others order dated 11.03.2026 and also in the case of Gas Supply Co. Pvt. Ltd. vs ACIT in ITA No.5138/Del/2025 order dated 10.04.2026. Ld.AR thus, requested that the proceedings initiated u/s 148 of the Act are bad in law and consequent reassessment order passed deserves to be quashed.

On the other hand, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that the assessee has disclosed LTCG from the sale of share of penny stock company. The Investigation Wing has provided tangible material which suggests that pre-arranged, price rigging scheme handed by entry operators to controvert unaccounted cash into tax free capital gain via accommodation entries. The test of human probability applied on such transactions and due process of law was followed before re-opening of the assessment where information was provided to the assessee u/s 148A(b) of the Act and thereafter, order u/s 148A(d) was passed therefore, the order passed by the AO after validly re-opening the assessment cannot be held as unlawful and he prayed accordingly.

Heard the contentions of both parties at length and perused the material available on record. In the instant case, it is observed that the transactions of sale shares of Goldline International Finvest Ltd. and the long term capital gain earned from such sales was duly declared by the assessee in the return of income filed. The assessment has already been completed u/s 153C of the wherein all the material facts were examined by the AO. The present reassessment proceedings u/s 147 of the Act were initiated based on one-handwritten sheet found and seized from the resident of the assessee. The AO alleged that the said sheets contained the transaction of bogus long term capital gain however, it was observed that the said loose paper contained the notings of transactions of sale of shares of M/s. Goldline International Finvest Ltd. and all the details noted therein were duly recorded in the books of accounts of the assessee. Thus, it cannot be held as incriminating material based on the proceedings u/s 148 could be initiated after invoking the provisions of section 149(1)(b) of the Act.

It is further observed that the information referred in Insight Portal referred the SEBI order dated 29.06.2015 which was prior to the date of assessment order passed u/s 153C of the Act and thus, were already available with the AO when such order was passed on 28.12.2022 and therefore, it cannot be held that new/fresh material was came into the possession of the AO. The Co-ordinate Bench of Delhi Tribunal in the case of DCIT vs Malhotra Cables Pvt. Ltd. in ITA No. 1317/Del/2025 vide its order dated 11.03.2026 under identical circumstances, has held that provision of section 149(1)(b) mandates the existence of incriminating material found /seized during the course of search which contained information of income in the form of assets, expenditure etc. and accordingly, ratio decidendi of Hon’ble Apex Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. reported in 454 ITR 212 (SC) would be applicable even if assessment framed u/s 147 consequent to search where 03 years for lapse from the end of the relevant AY. It is also a matter of fact when the search was carried out in the case of the assessee on 20.02.2022, proceedings u/s 153C were continued and they were not abated and the notice was issued u/s 148 was issued after the completion of proceedings u/s 153C, based on the same material which were collected and considered in the assessment order passed u/s 153C of the Act. The Co-ordinate Bench in the case of Gas Supply Co. Pvt. Ltd. vs ACIT (supra) while dealing with the same issue under identical circumstances, has made following observations:-

In view of the above discussion and further considering the facts that in the case of assessee, no new/fresh tangible material was brought on record which could be held as incriminating material more particularly, when AO himself has observed in the notice u/s 148A(b) that the documents found during the course of search in the case of the assessee, contained transactions of sale of shares which were duly recorded in the books of accounts and funds were transferred through Payee Account Cheque therefore, it could not be held that said sheet found during the course of search is the incriminating material and SEBI order referred by the AO dated 29.06.2015 was available with the AO much prior to the initiation of the proceedings u/s 153C and therefore, the said transactions, it cannot be held as information found during the course of search and incriminating material based on which notice u/s 148 could be issued.

Considering the entirety of the facts and circumstances of the case, and by respectfully following the orders of the coordinate benches, we hold that the proceedings initiated u/s 147 of the Act on the basis of the same material which was available in the assessment records and no new/fresh material or any incriminating material was found as a result of search carried out in the case of the assessee on 20.07.2022 and therefore, vitiated the entire reassessment proceedings and accordingly, the re-assessment order passed is quashed. The Grounds of appeal Nos. 1 to 6 and 8 to 9 raised by the assessee are allowed.

Since we have decided the legal grounds of appeal in favour of the assessee, the remaining grounds of appeal are not adjudicated.

In the result, appeal of the assessee is partly allowed.

Now we take appeal of the assessee in ITA No.6738/Del/2025 for Assessment Year 2016-17.

In the result, appeal of the assessee is partly allowed.

In the final result, both the captioned appeals in ITA Nos. 6734/Del/2025 in the case of Pramod Bahl and ITA No. 6738/Del/2025 in the case of Vinod Bahl, for Assessment year 2016-17, are partly allowed.