TRILOK CHAND CHHABRA vs. PRINCIPAL COMMISSIONER OF INCOME TAX
What did the High Court hold?
The Court held that the reassessment proceedings initiated by the respondent were invalid and quashed the impugned notice and order. The primary reasoning was that the Long Term Capital Gains (LTCG) were fully disclosed by the assessee and dealt with by the Assessing Officer in the original assessment order dated March 24, 2014. The Court noted that the original assessment order explicitly mentioned the sale of immovable property and the calculation of LTCG, including an addition of Rs. 14,850 under Section 50C. Therefore, the material in question was available to the Assessing Officer from the beginning and could not be termed a non-disclosure by the assessee. The Court found that the reasons for reassessment did not demonstrate that income had escaped assessment due to the assessee's failure to make a return, respond to notices, or disclose material facts. The initiation of reassessment after four years, based on a mere change of opinion regarding material already on record, was contrary to the proviso to Section 147. The Court emphasized that a mere change of opinion does not satisfy the "reason to believe" requirement, which necessitates objective determination based on tangible information. The petitions were allowed, and the notice and order were quashed.
What were the facts?
The petitioners, Saroj Chhabra and Trilok Chand Chhabra, filed writ petitions challenging a notice under Section 148 of the Income Tax Act, 1961, dated March 27, 2018, and an order dated September 24, 2018, which disposed of their objections to reassessment proceedings for Assessment Year 2011-12. The petitioners were engaged in manufacturing FMCG products and also received rental income. They had filed their return for AY 2011-12 on September 27, 2011, declaring an income of Rs. 67,10,020, which included exempt Long Term Capital Gains (LTCG) of Rs. 2,20,58,887 from share transactions, accepted under Section 143(1). A scrutiny assessment under Section 143(3) was completed on March 24, 2014, assessing income at Rs. 70,83,460 with an addition of Rs. 3,73,439 for undisclosed rental income and other disallowances. The reassessment notice was issued more than four years after the original assessment.
What were the issues?
1. Whether the reassessment proceedings initiated by the respondent under Section 147 of the Income Tax Act, 1961, vide notice dated 27.03.2018, for Assessment Year 2011-12, are valid when the original assessment under Section 143(3) was completed more than four years prior, and there is no allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Assessee's arguments: - The respondents have not provided any reasons to justify the notice under Section 148 and initiation of proceedings under Section 147. - The reopening is an attempt to review an earlier order, constituting a mere change of opinion, which is impermissible. - No independent application of mind or transaction-specific material was provided to justify reopening. - The petitioners fall under the proviso to Section 147, and since the original assessment under Section 143(3) was made and no action was taken for four years, reassessment is not permissible unless there was a failure to file a return, respond to notices, or disclose all material facts. - Relied on Shiv Lal Soni Vs. Union of India & Anr. Revenue's arguments: - The revenue contended that the reassessment proceedings were initiated based on tangible material and that the assessee had failed to disclose all material facts necessary for assessment, thereby attracting the proviso to Section 147.
Which sections of the Income-tax Act were involved?
Section 148,Section 147,Section 139,Section 143(1),Section 143(2),Section 142(1),Section 143(3),Section 10(38),Section 50C,Section 271(1)(c)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Judgment 24/01/2025
These Civil Writ Petitions under Section 226/227 have been preferred claiming the following reliefs: “The petitioner accordingly prays that this Hon’ble Court may kindly be pleased to: a. issue a writ in the nature of Certiorari or an order, quashing the impugned notice u/s 148 of the Act dated 27.03.2018 (Annexure-1) and the impugned letter/order dated 24.09.2018 (Annexure-2) disposing of the objections to the initiation of the reassessment proceedings of the respondent; b. issue a writ in the nature of Certiorari or an order quashing the reassessment proceedings initiated by the respondent in pursuance to the notice dated 27.03.2018 u/s 148 of the Act (ANNEXURE-1), for the assessment year 2011-12; c. issue a writ in the nature of mandamus or an order prohibiting the respondent to frame reassessment under the relevant provisions of the Act; d. issue a writ in the nature of Mandamus prohibiting the respondent from making fishing and roving inquiries; e. pass any other order(s) as this Hon’ble Court may deem to be fit and more appropriate in order to grant interim relief to the petitioner;”
As the pleaded facts and the record would reveal, the instant petitions have been filed against initiation of the proceedings under the provisions of Income Tax Act, 1961 (hereinafter referred to as ‘Act of 1961’). The present assailment, as reflected in the aforequoted prayer clauses, is to the notice dated 27.03.2018 issued to the petitioner under Section 148 of the Act (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (3 of 28) [CW-16512/2018] of 1961 and the order dated 24.09.2018 disposing of the objections raised against initiation of proceedings for re-opening of the assessment under Section 148 of the Act of 1961 for the Assessment Year 2011-12. 3. The case of the petitioners is that they are engaged in the business of manufacturing of F.M.C.G. Products, like Detergent Powder etc. under the name of Care Plus (proprietorship concern) and also Apex Home Appliances (proprietorship concern), having situated at Nalagarh Ropar Road, near Dherawal Checkpost, Nalagarh and also received rental income from house property, at various locations in India.
The petitioners have filed their Income Tax Returns for the Assessment Year 2011-12 under Section 139(1) of the Act of 1961 on 27.09.2011 declaring income to be Rs.67,10,020/- and a disclosure was made of exempt income in Schedule E1 of the return amounting to Rs.2,20,58,887/- on account of Bogus Long Term Capital Gains from the trading of Share transactions at recognized stock exchange on which securities transaction tax was also paid under Section 10(38) of the Act of 1961, which was duly accepted under Section 143(1) of the Act of 1961. A selected scrutiny was conducted by issuing a notice dated 26.09.2012 under Section 143(2) of the Act of 1961 and queries were raised by notice under Section 142(1) of the Act of 1961 on 20.05.2013 and another notice under Section 142(1) of the Act of 1961 dated 05.12.2013; the same were duly responded by the petitioners by way of detailed replies.
The Respondent No.2 completed the assessment under Section 143(3) of the Act of 1961 by passing an order dated (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (4 of 28) [CW-16512/2018] 24.03.2014 and assessed the income at Rs.70,83,460/- after making an addition due to difference of opinion to be of Rs.3,73,439/- on account of undisclosed rental income from house property; addition of 50C of the Act of 1961, disallowance of depreciation and late deposit of PF & ESI to returned income of Rs.67,10,020/-. The petitioners received another notice dated 27.03.2018 under Section 148 of the Act of 1961 and to which he responded by filing Returns of Income on 24.04.2018 with proper acknowledgment declaring income to be Rs.67,10,020/-. The petitioners also sought recorded reasons for initiation of proceedings under Section 147 of the Act of 1961. The petitioners received another notice on 25.04.2018 containing the reasons recorded for initiation of the proceedings under Section 147 of the Act of 1961. The petitioner further sought more information by letter dated 10.05.2018 for the purpose of meeting all the objections raised under Sections 147 & 148 of the Act of 1961. 4. Learned counsel for the petitioners submit that the respondents have not provided any reasons so as to justify the notice under Section 148 of the Act of 1961 and initiation of the proceedings under Section 147 of the Act of 1961 and it was only a reopening made as an attempt to review an earlier order in the garb of the proceedings in question, whereas it was merely a change of opinion, which is not permissible in law.
Learned counsel further submits that no independent application of mind for reopening has been made and no case of transaction specific material has been provided which could bring in the reasons to establish a case for reopening. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (5 of 28) [CW-16512/2018] 4.1. 1. Learned counsel also submits that there is no information with the respondents which could make it a direct case for reassessment.
Learned counsel has drawn the attention of this Court to the language used in Section 147 of the Act for the purpose of Income Escaping Assessment wherein the Counsel submits that the petitioner falls under the proviso to Section 147 of the Act of 1961 and thus, once the assessment under sub-section (3) of Section 143 of the Act of 1961 was made in the relevant assessment year and no action was taken for four years, then it was not open for the respondents to initiate any kind of proceedings for escaped assessment for such assessment year, unless the income chargeable to tax had escaped assessment, for reason of failure on the part of the assessee to make a Return under Section 139 of the Act of 1961 or no response to notice under Section 142(1) or Section 148 of the Act of 1961 or to disclose fully and truly all materials necessary for the assessment.
In support of such submissions, learned counsel relied upon the judgment rendered by a Coordinate Bench of this Hon’ble Court in the case of Shiv Lal Soni Vs. Union of India & Anr. (D.B. Civil Writ Petition No.9217/2015, decided on 09.09.2024), relevant portion whereof, as relied upon, reads as under: “8) In the background of the above contention, it is apt to refer to Section 147 of the Income Tax Act, 1961, which reads as follows:- “Income escaping assessment.
If any income chargeable to tax, in the case of an assessee, has escaped assessment for any (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (6 of 28) [CW-16512/2018] assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Provided that where an assessment under sub- section (3) of section 143 or the section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. 9) The first proviso to Section 147 of the Act restricts the action to be taken after expiry of 4 years from the end of the relevant assessment year. However, it has exception. In order to fall under the exception, any income chargeable to tax has escaped assessment for the assessment year by reason of failure on the part of the assessee-(i) to make a return under Section 139 or (ii) no response to a notice issued under sub-section (1) of Section 142 or Section 148; (iii) failure to disclose fully (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (7 of 28) [CW-16512/2018] and truly all material facts necessary for assessment of the relevant assessment year. 13) The extended limitation under the first proviso to Section 147 of the Act would apply to the cases where there is failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment of the relevant assessment year. The assessment proceedings and the nature of facts disclose by the assessee clearly show that he has disclosed the acquisition of capital gains and drawing of the FDR. Such FDR was also verified by the Assessing Officer with the bank. There is no failure on the part of the assessee in disclosing the material facts necessary for the relevant assessment year. Therefore, invocation of present petition is barred by first proviso to Section 147 of the Act. 14) The second ground raised by the assessee is that there is no proper reason which led to issuance of notice dated 26.03.2015. The reasons for the issuance of notice were recorded under order dated 27.02.2015 (Annexure- 5). A glance of the reasons under Annexure-5 discloses that there were no fresh facts received which could not be made available earlier on account of concealment of any material facts by the assessee and it appears to be a change of opinion on re-appreciation of evidence or material, which facts were already furnished by the assessee during his regular assessment process. Therefore, on this count also, the writ petition is liable to be allowed. 15) In the result, the present writ petition is allowed. The impugned notices dt. 26.03.2015 and 27.02.2015 are hereby quashed.”
On the other hand, learned counsel for the respondents, while opposing the aforesaid submissions made on behalf of the petitioners, submits that the instant petitions do not have any substance to show that the escaped assessment proceedings could (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (8 of 28) [CW-16512/2018] not have been re-opened against them. He further submits that it is not open for the petitioners to challenge the notices under Section 148 and the proceedings under Section 147 of the Act of 1961, on count of availability of an alternate remedy to lay such challenge.
In the reply, the learned counsel for the respondents has relied upon the judgment rendered by the Hon’ble Apex Court in thus: “We see no justifiable reason to interfere with the order under challenge. However, it was clarified that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in the proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of abovesaid five assessment years.”
Learned counsel further submits that there are wide powers including the power to initiate proceedings pertaining to escaped assessment and once an order passed in this respect is reasoned and equipped with sufficient material, then any kind of interference by this Court at this stage, would not be appropriate. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (9 of 28) [CW-16512/2018]
Learned counsel also submits that once the reasons were received at a subsequent stage, such information has to be evaluated and if the satisfaction of the officer is there for conducting proceedings for escaped assessment, then the same has to be initiated.
Learned counsel further submits that the material which was placed before the authorities indicated that full and true disclosure of the relevant facts has not been made and thus, the provisions of Section 147/148 of the Act of 1961 were invoked.
Learned counsel also submits that it is clear in the present case that before issuance of the notice under Section 148 of the Act of 1961, the Assessing Officer not only recorded the reasons but also made his own belief and reasoning, escapement of assessment for the period under consideration. The Assessing Officer had prima facie reasons to believe that income had escaped and notice was accordingly issued after receiving the necessary approval of the concerned authorities, who were also satisfied with the reasons recorded by the Assessing Officer.
Learned counsel further submits that the information regarding Bogus Long Term Capital Gains had only surfaced after investigation was carried by the investigating wing and therefore, the material available on record cannot tantamount to disclosure of fully and truly all material facts on the part of the assessee requiring the proceedings under Section 147 of the Act of 1961 and issuance of notice under Section 148.
In support of such submissions, learned counsel also relied upon the judgment rendered by a Division Bench of this Hon’ble (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (10 of 28) [CW-16512/2018] Commissioner of Income-tax, Range-1, Bikaner, (2018) 89 taxmann.com 45 (Rajasthan), relevant portion whereof, as relied upon reads as under:
“14. In the instant case, a perusal of the reasons recorded by the AO for issuing notice under Section 148 of the Act reveals that during the assessment proceedings for A.Y. 2014-15 it was noticed that the appellant assessee has received share application money to the tune of Rs.2.2 crore from 9 entities which was utilized during the year and subsequently returned in Financial Year 2013-14. That apart, on further examination of certain information received from the Directorate of Investigation, Kolkata which had carried the investigation in the case of the 9 entities, details whereof has been set out in the reasons recorded, it was ascertained that those 9 entities are the companies with no real business and are only engaged in business of providing accommodation entries of bogus nature to beneficiary concerns which was further confirmed by the directors/dummy directors/key persons of the said entities in their respective statements. Thus, on the basis of the material on record, AO opined that the appellant company has received and utilised the share application money received from bogus sources lacking genuineness, creditworthiness, genuine identity, which fall within the purview of Section 68 of the Act.
In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational or there exists no rational and intelligible nexus between the reasons and the belief.”
Heard learned counsel for the parties as well as perused the record of the case, alongwith the judgments cited at the Bar. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (11 of 28) [CW-16512/2018]
This Court has carefully examined the provisions of law i.e. Sections 143, 147 & 148 of the Act of 1961, and for ready reference, the same are reproduced as hereunder: “143. Assessment. (1)Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;(iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi)addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (12 of 28) [CW-16512/2018] within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub- clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee; ( d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him: Provided further that no intimation under this sub-section shall be sent after the expiry of [nine months] from the end of the financial year in which the return is made. Explanation.—For the purposes of this sub-section,— (a)"an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (13 of 28) [CW-16512/2018] (i)of an item, which is inconsistent with another entry of the same or some other item in such return; (ii)in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii)in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b)the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). (1A)For the purposes of processing of returns under sub- section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section.(1B)Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012. (1C)Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament. (1D)Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2):Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (14 of 28) [CW-16512/2018] (2)Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:Provided that no notice under this sub-section shall be served on the assessee after the expiry of [three] months from the end of the financial year in which the return is furnished. (3)On the day specified in the notice issued under sub- section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment: Provided that in the case of a— (a)research association referred to in clause (21) of section 10; (b)news agency referred to in clause (22B) of section 10; (c)association or institution referred to in clause (23A) of section 10; (d)institution referred to in clause (23B) of section 10,which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution, shall (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (15 of 28) [CW-16512/2018] be made by the Assessing Officer, without giving effect to the provisions of section 10, unless— (i)the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B), as the case may be, by such research association, news agency, association or institution, where in his view such contravention has taken place; and (ii)the approval granted to such research association or other association or institution has been withdrawn or notification issued in respect of such news agency or association or institution has been rescinded: Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub- clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to sub-section (4) of section 12AB, as the case may be, he shall— (a)send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and (b)no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB: Provided also that where the Assessing Officer is satisfied that the activities of the university, college or other (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (16 of 28) [CW-16512/2018] institution referred to in clause (ii) and clause (iii) of sub- section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer. (3A)The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) [or section 144] so as to impart greater efficiency, transparency and accountability by— (a)eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible; (b)optimising utilisation of the resources through economies of scale and functional specialisation; (c)introducing a team-based assessment with dynamic jurisdiction. (3B)The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2021. (3C)Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (17 of 28) [CW-16512/2018] notification is issued, be laid before each House of Parliament. (3D) Nothing contained in sub-section (3A) and sub-section (3B) shall apply to the assessment made under sub-section (3) or under section 144, as the case may be, on or after the 1st day of April, 2021. (4)Where a regular assessment under sub-section (3) of this section or section 144 is made,—(a)any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; (b)if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.” “147. Income escaping assessment. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Provided
that where an assessment under sub-section
(3) of section 143 or the section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (18 of 28) [CW-16512/2018] material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.”
Issue of notice where income has escaped assessment. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (19 of 28) [CW-16512/2018] Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section. Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,— (i)any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii)any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv)any information made available to the Assessing Officer under the scheme notified under section 135A; or (v)any information which requires action in consequence of the order of a Tribunal or a Court. Explanation 2.—For the purposes of this section, where,— (i)a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii)a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii)the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (20 of 28) [CW-16512/2018] section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv)the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.”
This Court observes that the income escaping assessment was done for the year 2011-12, after a lapse of four years, on the ground that the Assessing Officer had reason to believe that the assessee has failed to bring to the notice of the respondent department of the Long Term Capital Gains from the trading of Share transactions.
This Court further observes that the impugned order dated 24.09.2018 pertaining to the disposal of the objections raised against reopening of assessment under Section 148 of the Act of 1961, has mentioned therein that a copy of reasons recorded by the Assessing Officer for reopening the assessment was provided to the assessee and that the same reveals the complete reasoning (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (21 of 28) [CW-16512/2018] of the Assessing Officer before opening the assessment. The same is reproduced, for ready reference, as hereunder:- “1. Return of income was filed by the assessee on 27.09.2011 for the year under consideration vide ITR-4 showing total income of Rs.67,10,030/-. Return was processed u/s.143(1) on 04.11.2011 and assessment was completed vide order dated 24.03.2014 u/s. 143(3) of the Income Tax Act, 1961 wherein total income was assessed at Rs.70,83,460/-.
The Dy. Director of Income Tax (Inv.), Unit-IV, Thane has passed an information regarding bogus long term capital gain alongwith its beneficiaries, which was forwarded vide letter No.THN/DDIT (Inv)-IV(1)KCL Infra/17-18 dated 12.03.2018 to the Pr. Director of Income Tax (Investigation), Pune. The assessee was found to be one of the beneficiaries.
List of penny stock related cases was received from CBDT (PMO Reference) by the office of the DDIT (Inv.), Unit-IV(1), Thane, M/s. KCL Infra Project Ltd. (former known as J/s. Kadamb Construction Ltd.) is one of such company referred in the list. Investigation was done in the shares of the said company. It came to light that large scale manipulation was done in market price of shares of the said company by certain persons working as a syndicate in order to provide entries of tax exempt bogus Long term capital gains to large number of persons in lieu of unaccounted cash. The unaccounted cash of beneficiaries is utilised to purchase share of such companies at a very high artificially inflated market price. This practice is carried out with prime objective of accommodating unaccounted cash of beneficiaries without paying any tax. The assessee was found to one of the beneficiaries who sold share of the above company i.e. M/s. Kadamb Construction Ltd. (Scrip Code 531784) for amount of Rs.1,44,46,915/-. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (22 of 28) [CW-16512/2018]
These bogus share transactions were carried out to show bogus long term capital gain which is exempted from taxation u/s. 10(38) of the IT Act, 1961. Therefore the assessee has not shown such transaction in computation of total income in income tax return.
The assessee transferred share of the above said company resulting in long term capital gain which is exempted u/s. 10(38) of the IT Act, 1961. However, on account of investigation/inquiries made by the DDIT (Inv.), Unit-IV(1), Thane it was found that such transaction of the assessee is bogus transaction. Persons who were involved in providing such bogus long term capital gain, explained modus operandi of such transactions in their statements. This company was found to be paper company which carried out no real business transaction. Volume and price movement of shares of such company was abrupt, unrealistic and not support by fundamentals of the company. The prime objective of such transactions is to accommodate unaccounted cash of beneficiaries showing transfer of shares by beneficiaries.
I have examined the information and material available on record and after application of my mind, I have reasons to believe that the above said amount of Rs.1,44,46,915/- on account of bogus transfer of shares has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. 7. It is pertinent to mention here that assessment u/s.143(3) of the Income Tax Act, 1961 has been made in this case vide order dated 24.03.2014. In view of the above, the provisions of clause (c) of Explanation 2 to Section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (23 of 28) [CW-16512/2018]
In this case more than four years have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from the Principal Commissioner of Income Tax as per the provisions of Section 151 of the Income Tax Act, 1961.”
This Court further observes that the petitioner-assessee has disclosed the said Bogus Long Term Capital Gains; the same have been a part of the said proceedings (disclosure made as an exempt income in Schedule E1 of the return amounting to Rs. 2,20,58,887/-, Annexure-3) and also have been contemplated by the Assessing Officer in the proceedings under Section 143 of the Act of 1961. However, this Court finds that there is a stricter parameter provided in the proviso to Section 147 of the Act of 1961, which provides that if once the assessment was made under Section 143(3) and the information (of long term capital gains) was made available by the assessee and was within the consideration of the assessing authority, then no action could be taken after the expiry of four years.
This Court further observes that the proviso to Section 147 of the Income Tax Act, 1961, has been incorporated with the legislative intent that in cases where an assessment is sought to be reopened beyond the prescribed limitation period of four years, a stricter threshold must be applied. This higher standard is essential for determining whether the material in question constitutes a failure to disclose income, thereby justifying the invocation of reassessment proceedings on the grounds of escaped assessment. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (24 of 28) [CW-16512/2018]
This Court acknowledges that Section 147 of the Income Tax Act, 1961, sets forth two essential conditions for the reopening of assessment proceedings through the issuance of a notice under Section 148, as have been laid down by the Hon’ble Apex Court in the judgment of Parshuram Pottery Works Co. Ltd. v. CIT ((1977) 1 SCC 408, decided on 16.11.1976) namely:
The Assessing Officer must possess a "reason to believe" that income chargeable to tax has escaped assessment; and 2. Such "reason to believe" must arise due to the omission or failure on the part of the Assessee to make a full and true disclosure of all material facts necessary for the assessment pertaining to the relevant assessment year.
This Court further takes cognizance of the series of judgments pronounced by the Hon’ble Apex Court, which have consistently held that it is the duty of the Assessee to make a full and complete disclosure of primary facts. However, it is not incumbent upon the Assessee to disclose everything in absolute detail to the authority. Consequently, the Assessing Officer is vested with the jurisdiction to reopen assessment proceedings only when the conditions prescribed under Section 147 are satisfied. 13.1.Furthermore, it is imperative to note that if, during the original assessment proceedings, the Assessing Officer has arrived at a conclusion based on the material facts placed before him, then a subsequent change in belief, solely on the ground that an error was committed in the earlier decision, cannot be a valid (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (25 of 28) [CW-16512/2018] ground for reopening the assessment. A mere change of opinion on the part of the Assessing Officer does not satisfy the requirements of Section 147 and, therefore, would not justify the invocation of reassessment proceedings. 13.2.This Court also observes that the expression “reason to believe” does not imply the mere subjective satisfaction of the Assessing Officer; rather, it necessitates an objective determination based on tangible and concrete information specific to the case at hand. It underscores that a mere suspicion, conjecture, or instinct on the part of the Assessing Officer does not suffice to invoke reassessment proceedings under this provision.
This Court after perusing the record of the case, finds that the Long Term Capital Gain have been very well a part of the proceedings and was taken on record by the Assessing Officer in its order dated 24.03.2014, relevant portion whereof reads as follows:
“2. Addition u/s 50C: During the year under consideration the assessee has sold immovable property at village Harnikala for Rs.13,50,000/- and declared the income under the head long term capital gain. During the course of assessment proceedings, it is noticed that the value of the said property was taken at Rs.13,64,850/- by the Registry Department. Since, the value taken by the Registry Department is higher than the sale value, the long term capital gain is to be calculated on the basis of value taken by the Registry Department as per provisions of section 50C of the IT Act but the assessee has computed the LTCG on the basis of actual sale value therefore, the difference between value taken by the Registry Department and the actual sale value which (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (26 of 28) [CW-16512/2018] comes to Rs.14,850/- is hereby added to the total income of the assessee. Since, the assessee is concealed her income, penalty proceedings u/s 271(1)(c) are initiated on this issue.” The same shows that information was duly laid before the assessing officer, who in turn, has dealt with the same, regarding the issue pertaining to the long term capital gain.
It is evident that the reasons given in the proceedings under Section 147 and the notice under Section 148 of the Act of 1961, do not carry any reason to show that the income chargeable to tax had escaped assessment by reason of failure or omission on the part of the assessee to make return under Section 139 or in response to notices issued under Section 142(1) or Section 148 or to disclose fully and truly all material facts necessary for the assessment. 14.2.Once the long-term capital gains have been duly disclosed and assessed, the reassessment of the same after four years, cannot be initiated in the absence of any fresh tangible material indicating that the assessee had failed or omitted to disclose relevant facts at the time of the original assessment. Any attempt to reopen the assessment under such circumstances would be contrary to the legal framework and in violation of the proviso to Section 147 of the Income Tax Act, 1961. 15. This Court further notes that if the provision of the taxing statute prescribes a clear limitation period for reopening such proceedings, a strict interpretation of the same should be taken, otherwise, the same would give indefinite powers to the Assessing Officer in this regard, which may not be in the larger interest of justice. (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (27 of 28) [CW-16512/2018]
This Court while looking into the peculiar factual matrix of the case, notes that the material in question, i.e., the long term capital gains, were made available to the assessing officer from the beginning of the said proceedings, by the assessee, thus the same cannot be termed as “non-disclosure” on the part of the assessee.
This Court, having regard to the judgment delivered by the Coordinate Bench of this Hon’ble Court in Shiv Lal Soni v. Union of India & Anr. (D.B. Civil Writ Petition No. 9217/2015, decided on 09.09.2024), notes that the extended limitation period prescribed under the first proviso to Section 147 of the Income Tax Act, 1961, is attracted solely in cases where the assessee has failed to fully and truly disclose all material facts necessary for assessment. This proviso operates as an exception to the general bar on reopening assessments beyond four years from the conclusion of the relevant assessment year. In the instant matter, the initiation of reassessment proceedings appears to be premised solely on a mere change of opinion, arising from a reassessment of the evidence and material that had already been placed on record by the assessee during the original assessment proceedings.
This Court further observes that the judgments cited by the respondents in support of their contentions do not lend any substantive assistance to their case.
In view of the above, the present writ petitions deserves to be allowed, and the impugned notices and order are contrary to the basic law and thus, are prima facie illegal.
Consequently, the present writ petitions are allowed. Accordingly, the notice dated 27.03.2018 and the order dated (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
[2025:RJ-JD:5828-DB] (28 of 28) [CW-16512/2018] 24.09.2018, impugned in the instant petitions, are hereby quashed and set aside. All pending applications stand disposed of. (YOGENDRA KUMAR PUROHIT),J (DR.PUSHPENDRA SINGH BHATI),J 14-15-SKant/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 19/03/2025 at 12:53:18 PM) (Downloaded on 27/10/2026 at 11:17:11 PM)
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