UC METALS PRIVATE LIMITED,MALAD (WEST) vs. DCIT CIRCLE 13(1)(2), MUMBAI

As recorded in the reasons reproduced in the assessment order, the securities premium appearing in the assessee’s accounts increased from Rs.92,00,000/- as on 31.03.2011 to Rs.2,82,00,000/- as on 31.03.2012. During January 2012, 4,10,000 shares were allotted to family members at their face value of Rs.10/- each, for an aggregate consideration of Rs.41,00,000/-. In March 2012, a further 1,00,000 shares were issued to thirteen entities at a face value of Rs.10/- and a premium of Rs.190/- per share, aggregating to Rs.2,00,00,000/-. The latter amount comprised share capital of Rs.10,00,000/- and share premium of Rs.1,90,00,000/-.

The AO referred to the statement of Shri Mittal and the presence of blank signed share transfer forms and connected documents at the assessee’s premises. He drew an adverse inference from the differential issue price, the explanations concerning the investors’ participation in the company’s affairs, and the documents impounded during the survey. The recorded reasons also referred to investigation into certain sales transactions with the Omkar group and the alleged generation of unaccounted brokerage income. The AO alleged that the assessee had failed to disclose fully and truly the material facts concerning the transactions referred to in the reasons. On this basis, he recorded his belief that income chargeable to tax had escaped assessment and issued notice under section 148 of the Act on 31.03.2019.

During the reassessment proceedings, the assessee furnished explanations and documents concerning the share subscriptions. To verify the investors and the transactions, the AO issued summons under section 131 of the Act to the thirteen investor entities on 17.12.2019, requiring their attendance on 20.12.2019. The summons sought, amongst other particulars, returns of income, annual accounts, bank statements, details of the payments, sources of investment, share application documents and correspondence concerning the investments. The AO recorded that summons issued to six entities were returned with the remark “left” and that none of the thirteen entities attended or furnished the requisitioned details by the specified date.

The AO thereafter issued a show-cause notice dated 21.12.2019, requiring the assessee to produce the investors on or before 24.12.2019 and establish their identity and creditworthiness and the genuineness of the transactions. He recorded that the assessee did not produce the investors. On an appraisal of the investigation material, the documents and explanations furnished, and the surrounding circumstances discussed in the assessment order, the AO concluded that the assessee had not satisfactorily established the nature and source of the credits. He accordingly treated the aggregate receipt of Rs.2,00,00,000/-, comprising share capital and share premium, as unexplained cash credit under section 68 of the Act. The reassessment was

Aggrieved, the assessee preferred an appeal before the learned CIT(A), challenging both the validity of the reassessment and the addition under section 68 of the Act. During the appellate proceedings, the learned CIT(A) called for a remand report from the AO. The remand report dated 01.08.2025 supported the addition and disputed the assessee’s claim that the genuineness of the share premium had been examined during the original assessment. It nevertheless reproduced an earlier submission referring to the furnishing of Form 2 filed with the Registrar of Companies, particulars of the allottees and their income-tax return acknowledgements.

On the merits, the learned CIT(A) held that the documents furnished did not satisfactorily establish the creditworthiness of the investors or the genuineness of the transactions. He relied upon the findings in the assessment order, the non-appearance of the investors, the non-compliance with the summons and the observations in the remand report. He also recorded an adverse conclusion concerning the financial capacity and activities of the investor companies and sustained the addition of Rs.2,00,00,000/-.

As regards reopening, the learned CIT(A) held that the notice dated 31.03.2019 was issued within the six-year period applicable where the escaped income exceeded the prescribed monetary threshold. He also accepted the observation in the remand report that the assessee had not raised objections before the AO. Separately, while rejecting the grievance concerning delayed supply of reasons, the learned CIT(A) recorded that the reasons had been supplied on 23.10.2019, immediately after the request dated 22.10.2019. The appellate order contains differing references to the disposal of objections: paragraph 3.3 records that objections filed on 18.11.2019 were disposed of on 28.11.2019, whereas paragraph 5.1 refers to 6

Aggrieved by the order of learned CIT(A), the assessee is in further appeal before us.

Before us, the learned Authorized Representative (“AR”) reiterated the facts and grounds of appeal and relied upon the written submissions placed on record. At the outset, he challenged the assumption of jurisdiction under sections 147 and 148 of the Act. He invited our attention to the reasons recorded for reopening, the objections filed by the assessee and the order disposing of those objections. He submitted that the original assessment had been completed under section 143(3) of the Act on 03.03.2015, whereas the notice under section 148 was issued on 31.03.2019, beyond four years from the end of the relevant assessment year. According to him, the conditions prescribed in the first proviso to the then applicable section 147 were required to be satisfied before the completed assessment could be reopened.

The learned AR submitted that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. He contended that the particulars of share capital and share premium had been furnished during the original scrutiny proceedings. Referring to the correspondence reproduced in the reassessment order, he submitted that the assessee had furnished Form 2 filed with the Registrar of Companies, particulars of the allottees, the number and value of shares allotted, income-tax return acknowledgements, PAN particulars, bank statements and confirmations. He further submitted that the basis for issuing shares to the promoters at face value and to other investors at a premium had also been explained during the original assessment. According to him, the subsequent proceedings sought to reconsider an issue already examined in the scrutiny assessment and consequently amounted to a change of opinion.

Referring to the objections to reopening and the order dated 28.11.2019 disposing of those objections, the learned AR submitted that the AO had not adequately addressed the assessee’s explanation concerning the disclosures made in the original proceedings. He disputed the AO’s observation that the share premium issue had not been examined earlier and referred to the assessee’s further letter dated 06.12.2019, wherein the earlier correspondence and documents were brought to the AO’s notice. He also submitted that the recorded reasons had been supplied only after repeated requests and that the objections had been rejected without properly dealing with the factual and legal issues raised therein.

The learned AR further submitted that the learned CIT(A) had not properly adjudicated the challenge founded upon the first proviso to section 147. According to him, reference to the six-year outer limitation for issuance of notice did not answer the separate objection that there had been no failure to disclose fully and truly all material facts. He contended that the validity of the assumption of jurisdiction required independent consideration in the

Without prejudice to the jurisdictional challenge, the learned AR assailed the addition of Rs.2,00,00,000/- under section 68 of the Act. He submitted that the assessee had furnished documentary evidence concerning each of the thirteen investor companies, including their incorporation particulars, PAN, income-tax returns, audited financial statements, bank statements, confirmations, board resolutions, share application documents, statutory filings and particulars available on the Ministry of Corporate Affairs portal. According to him, these documents established the identity and creditworthiness of the investors and the genuineness of the transactions. He submitted that the subscriptions had been received through banking channels, shares had been allotted and the transactions were reflected in the relevant books and statutory records.

The learned AR submitted that the proviso to section 68 inserted by the Finance Act, 2012, with effect from 01.04.2013, did not apply to assessment year 2012-13. He contended that the authorities below had, in substance, imposed the additional obligation introduced by that proviso upon the assessee for an earlier assessment year. He maintained that the assessee had discharged the burden applicable to the year under consideration and that the evidence furnished could not be rejected merely because certain investors did not respond to departmental notices or appear before the AO. He further submitted that the financial capacity of the investors required examination of their overall financial position and could not be determined merely from isolated balances or entries in their bank accounts.

The learned AR specifically invited our attention to the portion of the remand report reproduced on page 43 of the learned CIT(A)’s order. He questioned the reliance placed upon observations concerning the investors’ supposed lack of concern for their investments, their attendance at meetings, 9

As regards the share premium, the learned AR referred to the assessee’s business background, financial position, profitability and future prospects. He submitted that the assessee had succeeded to an established proprietary business and that the premium of Rs.190/- per share reflected the commercial assessment of its business and earning potential. According to him, the difference between the price charged to promoters and that charged to outside investors did not, by itself, establish that the receipts represented unaccounted income. He also contended that no cash trail, circulation of funds, accommodation commission or flow of money from the assessee to the investor companies had been established.

The learned AR relied upon the judicial authorities referred to in the written submissions in support of the jurisdictional challenge and the explanation furnished under section 68. He also sought to distinguish the authorities relied upon against the assessee, submitting that those decisions involved materially different evidence concerning the existence, financial capacity or activities of the investors and the credibility of the documents. He maintained that the evidence furnished in the present case had not been effectively rebutted. Accordingly, he prayed that the reassessment proceedings be quashed or, alternatively, that the addition of Rs.2,00,00,000/- be deleted, with consequential relief.

We have considered the rival submissions and perused the material placed before us, including the orders of the authorities below, the reasons recorded for reopening, the objections raised by the assessee and the order disposing of those objections, as reproduced in the assessment order. The assessee has challenged both the assumption of jurisdiction under sections 147 and 148 of the Act and the addition of Rs.2,00,00,000/- under section 68. Since the jurisdictional challenge goes to the foundation of the reassessment, we first consider whether that challenge has received proper adjudication in the impugned appellate order.

The relevant dates are not in dispute. The original assessment was completed under section 143(3) of the Act on 03.03.2015. The notice under section 148 was issued on 31.03.2019, beyond four years from the end of assessment year 2012-13. Consequently, the assumption of jurisdiction was governed by the additional condition prescribed in the first proviso to section 147, as applicable when the notice was issued. Besides having reason to believe that income chargeable to tax had escaped assessment, the AO was required to have a legally sustainable basis for attributing such escapement to the assessee’s failure to disclose fully and truly all material facts necessary for assessment.

The requirement of the first proviso is distinct from compliance with the outer limitation prescribed for issuing a notice under section 148. Therefore, the circumstance that the notice was issued within six years and that the alleged escaped income exceeded the prescribed monetary threshold did not, by itself, resolve the assessee’s jurisdictional objection. The further question requiring determination was whether the alleged escapement had occurred by reason of a failure attributable to the assessee to make the 11

We also notice a material inconsistency in the factual premise accepted in the appellate order. The remand report stated that the assessee had not raised objections to reopening before the AO, and this observation was accepted while rejecting the jurisdictional challenge. However, the assessment order expressly records that objections were filed on 18.11.2019 and disposed of on 28.11.2019. It further records the assessee’s subsequent letter dated 06.12.2019 and the AO’s response dated 16.12.2019. The appellate order itself refers elsewhere to the filing and disposal of objections. Thus, the jurisdictional challenge could not properly be rejected as an afterthought on the footing that no objections had been raised during reassessment. The differing references to the disposal date also required reconciliation against the underlying documents.

The controversy concerning disclosure during the original assessment also requires closer examination. The assessee maintains that the share subscriptions, investor particulars and justification for the premium were examined during the scrutiny proceedings. The AO disputed that any opinion had been formed on the genuineness of the share premium. At the same time, the remand report reproduced an earlier submission referring to Form 2 filed with the Registrar of Companies, the names of allottees, the number and value of shares issued and shareholders’ income-tax return acknowledgements. This acknowledgement is relevant and could not be disregarded. Nevertheless, the precise contents of the original questionnaires, replies and enclosures, and the extent of examination undertaken, required verification before a definitive conclusion could be reached.

The acknowledgement that Form 2, allottee particulars and return acknowledgements were furnished during the original proceedings establishes disclosure of those particulars. It does not, without further examination, establish disclosure of the arrangements which the AO considered to be suggested by the subsequently impounded documents. Conversely, discovery of documents during a later survey does not dispense with examination of their contents, their connection with the transactions for the relevant year and their bearing upon the truthfulness and completeness of the earlier disclosures. These are the matters which required specific findings. Neither the subsequent material nor the assessee’s explanation concerning it could be dealt with merely through a general conclusion.

In CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), relied upon by the assessee, the Hon’ble Supreme Court observed that “The Assessing Officer has no power to review; he has the power to re-assess.” The prohibition against a mere change of opinion must therefore be applied after identifying the material considered in the original assessment and the material subsequently received. If the exercise involves only reconsideration of the same facts and evidence, the prohibition becomes relevant. If subsequent information prima facie exposes the untruthfulness of an earlier

In this connection, the decision in Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC), referred to by the AO, requires consideration. The Hon’ble Supreme Court recognised reopening upon subsequent information concerning the falsity of an earlier transaction and observed that “the sufficiency of reasons for forming the belief, is not for the Court to judge”. The enquiry nevertheless extends to whether the information is relevant and whether it bears a rational connection with the requisite belief. Therefore, the said decision cannot be distinguished merely because the share subscriptions had been disclosed during the original assessment. The nature and relevance of the subsequent information must first be examined. Equally, that decision does not authorize reopening upon an unsupported allegation of falsity. The competing contentions require application of these principles to the particular material identified in the recorded reasons.

The subsequent decision of the Hon’ble Supreme Court in Sanand Properties P. Ltd. v. Joint Commissioner of Income-tax, 2026 INSC 472, dated 12.05.2026, also explains the distinction between reconsideration of existing material and action upon subsequent information. At paragraph 111 referring Phool Chand (supra), the Court observed that “He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed”. Although the notices considered in that case were within four years, its explanation concerning subsequent survey material and change of opinion is relevant to the present controversy. It does not remove the additional requirement of the first proviso applicable here. Both aspects must be kept in view while examining whether the survey material supplied a sustainable basis for the allegation of failure to disclose.

Further, in Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332 (Bom.), the Hon’ble jurisdictional High Court observed: “The reasons 14

As regards the procedure followed in dealing with objections, the assessee relied upon GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), wherein the Hon’ble Supreme Court required disposal of objections: “by passing a speaking order”. In the present case, an order disposing of objections exists and is reproduced in the assessment order. The grievance therefore requires examination of whether the material objections were adequately addressed, particularly the objection concerning earlier disclosures. It cannot be adjudicated on an assumption of complete non- disposal. Likewise, the respective accounts concerning requests for the recorded reasons and their supply require consideration against the correspondence on record.

We have also considered the portion of the remand report reproduced on page 43 of the appellate order, to which the learned AR specifically referred. That portion substantially supports the conclusions in the assessment order by referring to the investors’ conduct, their alleged lack of concern for the investments, non-production of their representatives and the assessee’s failure to establish genuine investment transactions. These observations required evaluation in the context of the evidence and the precise issues raised. Their reproduction did not resolve the separate jurisdictional question concerning the original disclosures and the

Section 250(6) requires the appellate order to state the points for determination, the decision thereon and the reasons for that decision. We acknowledge that the impugned order contains discussion on jurisdiction and merits. Our conclusion is founded upon the specific shortcomings identified above, particularly the incorrect premise concerning objections and the inadequate examination of the first proviso, rather than a general description of the order as wholly unreasoned.

We are conscious that restoration cannot be ordered routinely or merely to afford another opportunity to improve an existing case. The present restoration is required because the jurisdictional challenge has been decided partly upon an incorrect factual premise and without the necessary comparison of the original disclosures with the subsequent material. It is intended to secure proper appellate adjudication of those identified matters. It shall not permit retrospective improvement of the recorded reasons or creation of a fresh basis for reopening.

In these circumstances, we consider it appropriate to set aside the impugned appellate order and restore the appeal to the file of the learned CIT(A) for fresh adjudication. The learned CIT(A) shall first decide the jurisdictional challenge with specific reference to the first proviso to section 147 applicable to the notice dated 31.03.2019. He shall examine the original assessment record, the questionnaires and replies, their enclosures, the recorded reasons, the objections and their disposal, and the survey material referred to in those reasons.

Upon such examination, the learned CIT(A) shall record specific findings concerning the material facts disclosed during the original

The validity of reopening shall be tested upon the reasons recorded before issuance of notice and the material supporting those reasons at that time. Examination of the original record and the material referred to in the reasons is permissible for that purpose. The learned CIT(A) shall not sustain reopening upon an altogether different ground or upon material subsequently gathered to create a jurisdictional basis which did not previously exist.

If the reassessment is held invalid, the learned CIT(A) shall grant the consequential relief in accordance with law. If it is held valid, he shall thereafter adjudicate the grounds concerning the addition of Rs.2,00,00,000/- under section 68. Such adjudication shall consider the evidence relating to the respective investors, the adverse material relied upon, the assessee’s explanations, the applicable statutory provisions and the judicial authorities cited by the parties. We express no concluded opinion on the genuineness of the subscriptions, the creditworthiness of the investors, the applicability of the proviso to section 68 or the ultimate sustainability of the addition.

The learned CIT(A) shall afford a reasonable opportunity of hearing to both parties and permit the assessee to respond to any adverse material proposed to be relied upon. Any further enquiry required for deciding the appeal may be undertaken in accordance with law, but the appellate adjudication shall remain with the learned CIT(A). All substantive contentions are left open, subject to the directions contained herein.