DCIT-1(1), BHILAI, BHILAI vs. LNS INDUSTRIES PVT LTD, BHILAI

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ITA 85/RPR/2025Status: DisposedITAT Raipur26 October 2026AY 2008-0930 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 upheld the CIT(A)'s order, dismissing the Revenue's appeal. The primary issue was the validity of reassessment proceedings initiated beyond four years from the end of the relevant assessment year. The Tribunal noted that for reassessment beyond four years, the first proviso to Section 147 mandates that the Assessing Officer must record a finding that the assessee failed to disclose fully and truly all material facts necessary for the assessment. The Tribunal found that the reasons recorded by the AO did not contain any such finding or whisper of the assessee's failure to disclose material facts. Relying on the decisions of the Hon'ble Chhattisgarh High Court (the jurisdictional High Court) in Hariom Ingots and Power Pvt Ltd vs PCIT and other precedents, the Tribunal held that the notice under Section 148 was issued without jurisdiction and was bad in law. Consequently, the reassessment order could not be sustained. The Tribunal dismissed grounds 3, 5, and 6 of the Revenue's appeal. Since the notice under Section 148 was quashed, all other grounds were rendered academic. The appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue appealed an order by the CIT(A) for AY 2008-09, which had quashed reassessment proceedings initiated under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961. The original assessment was completed on July 22, 2010. Reassessment proceedings were initiated on March 31, 2015, based on information discovered during the assessment for AY 2012-13, revealing a significant amount of share application money pending allotment, with a portion relating to AY 2008-09. The Assessing Officer (AO) found that certain Kolkata-based companies were paper entities and that the investment was the assessee's own unaccounted money. For other applicants, the assessee failed to furnish bank statements showing the immediate source of deposits. The CIT(A) held that there was no failure to disclose material facts, the reassessment was a change of opinion, and the notice under Section 148 was issued beyond four years and was thus illegal.

What were the issues?

1. Whether the CIT(A) was justified in holding that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, despite the AO's recorded reasons suggesting omission or misrepresentation? (Question of law) 2. Whether the CIT(A) erred in concluding that the reassessment was based on a "change of opinion" without appreciating that the AO had formed a fresh belief based on the analysis of existing facts, which can still justify reopening under Section 147? (Question of law) 3. Whether the absence of explicitly mentioning "failure to disclose fully and truly all material facts" in the reasons recorded invalidates the reassessment proceedings, despite the underlying reasoning suggesting such failure? (Question of law) 4. Whether the CIT(A) was correct in holding that reassessment is illegal due to the absence of "new tangible material," when the Supreme Court and High Courts have held that reassessment can be based on a fresh application of mind to existing facts? (Question of law) 5. Whether the CIT(A) erred in quashing the reassessment proceedings merely on procedural grounds, without examining the correctness of the substantive findings of the Assessing Officer? (Question of law) 6. Whether the CIT(A) was correct in holding that reassessment beyond four years was bad in law, even when the recorded reasons allegedly demonstrated that the assessee failed to make a full and true disclosure? (Question of law) 7. Whether, in the facts and circumstances of the case, the CIT(A) has failed to appreciate the distinction between "mere change of opinion" and "failure to disclose fully and truly," which is a condition precedent for reopening beyond four years under the first proviso to Section 147? (Question of law) Assessee's Contention (implied from CIT(A)'s order and Revenue's grounds): The reassessment proceedings were bad in law as they were based on a change of opinion, lacked tangible material, and the notice under Section 148 was issued beyond four years without recording the necessary satisfaction regarding the assessee's failure to disclose material facts, as required by the first proviso to Section 147. Revenue's Contention: The CIT(A) erred in quashing the reassessment proceedings. The AO had a fresh belief based on existing facts, justifying reopening. The absence of explicit mention of "failure to disclose" does not invalidate the proceedings. Reassessment can be based on a fresh application of mind to existing facts, and the CIT(A) should have examined the substantive findings of the AO. The reassessment was valid even beyond four years if the AO demonstrated failure to disclose.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 68,Section 250,Section 151,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI Dr. DIPAK P. RIPOTE

For Appellant: Shri S.R. Rao, Adv
For Respondent: Shri Rituparna Namdeo, CIT-DR

आदेश /ORDER

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2008-09 on 18.12.2024, emanating from the Assessment Order u/s 143(3) r.w.s. 147 of the Act, dated 30.12.2016.

2.

The Revenue has raised the following grounds of appeal: “1. Whether the Id. CIT(A) was justified in holding that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, despite the Assessing Officer's recorded reasons demonstrating an alleged omission or misrepresentation?

2.

Whether the Id. CIT(A) erred in concluding that the reassessment was based on a "change of opinion" without appreciating that the Assessing Officer had formed a fresh

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belief based on the analysis of existing facts, which can still justify reopening under Section 147?

3.

Whether the absence of explicitly mentioning "failure to disclose fully and truly all material facts" in the reasons recorded invalidates the reassessment proceedings, despite the underlying reasoning suggesting such failure?

4.

Whether the Id. CIT(A) was correct in holding that reassessment is illegal due to the absence of "new tangible material," when the Supreme Court and High Courts have held that reassessment can be based on a fresh application of mind to existing facts?

5.

Whether the Id. CIT(A) erred in quashing the reassessment proceedings merely on procedural grounds, without examining the correctness of the substantive findings of the Assessing Officer?

6.

Whether the Id. CIT(A) was correct in holding that reassessment beyond four years was bad in law, even when the recorded reasons allegedly demonstrated that the assessee failed to make a full and true disclosure?

7.

Whether, in the facts and circumstances of the case, the Id. CIT(A) has failed to appreciate the distinction between "mere change of opinion" and "failure to disclose fully and truly," which is a condition precedent for reopening beyond four years under the first proviso to Section 147?

8.

The order of the Id. CIT(A) is erroneous both in law and on facts.

9.

Any other ground which may be adduced at the time of hearing.”

Submission of Ld. DR :

3.

The Ld. DR filed written submission which is reproduced here as under : “A. STATEMENT OF FACTS

1.

The respondent is a company engaged in trading of cigarettes, safety match boxes and liaisoning work and follows the mercantile system of accounting. For the assessment year 2008-09, the respondent filed its return of income on 29th September 2008 and the assessment was originally completed under section 143(3) of the Income Tax Act, 1961 on 22nd July 2010, determining total income at

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Rs 18,93,560 as against the returned income of Rs 17,24,970. Reference is invited to page 1 of the assessment order.

2.

During the course of assessment proceedings for the assessment year 2012-13, it was notice that as per the balance sheet as on 31st March 2012, an amount of Rs 18,85,50,572 was lying as share application money pending for allotment. On a year wise analysis, an amount of Rs 3,21,78,367 was found to relate to the assessment year 2008-09 presently under consideration. Reference is invited to paragraph 1 at pages 1 to 3 of the assessment order.

3.

On the basis of the above information, the case was reopened under section 147 of the Act after recording reasons and after obtaining due approval as required under section 151 of the Act. Notice under section 148 was issued on 31st March 2015 and served on 1st April 2015. In response, the respondent, vide letter dated 17th June 2015, requested that the return originally filed be treated as the return filed in response to the notice under section 148. Thereafter, notice under section 143(2) was issued on 22nd June 2015. Reference is invited to paragraph 2 at pages 3 and 4 of the assessment order.

4.

A detailed query letter was issued on 12th September 2016 calling upon the respondent to establish the identity, creditworthiness and genuineness of the share applicants, and to produce the share application register, share application forms, documentary evidence of the mode of receipt of money, evidence of address of the applicants, income tax returns and balance sheets of the applicants for the preceding three years, and books of account and vouchers. No compliance was made within the time allowed. Reference is invited to paragraphs 2 to 4 at pages 3 to 5 of the assessment order.

5.

In response to a further notice dated 27th December 2016, the authorised representative and the director of the respondent appeared and filed written submissions, and books of account produced were subjected to test check. Reference is invited to paragraph 3 at page 4 of the assessment order.

6.

The respondent submitted that all share applicants were assessed to income tax, that share application forms had been furnished, and that confirmations and copies of income tax returns had been obtained and filed in respect of most of the applicants. Reference is invited to paragraph 4 at pages 4 and 5 of the assessment order.

7.

The Assessing Officer did not find the explanation acceptable. It was specifically found that the share application money purportedly received from M/s Ceja Traders Private Limited, M/s Nabaratna Vinimay Private Limited, M/s Debdaru Vinimay Private Limited, M/s Arcade Dealcom Private Limited and M/s Vanila Vinimay Private Limited was not genuine, since these concerns were found to be

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Kolkata based paper companies without any real business or financial strength, existing only on paper and lacking any physical presence at their given addresses. It was accordingly held that the investment shown in the names of these concerns was in fact the respondent's own unaccounted money brought back in the guise of share application money. Reference is invited to paragraph 5 at pages 5 to 6 of the assessment order.

8.

With respect to the remaining applicants, including a non-resident individual and a non-resident corporate entity, the respondent failed to furnish bank statements evidencing the immediate source of the deposits, notwithstanding other documents filed. Reference is invited to paragraph 6 at pages 6 and 7 of the assessment order.

9.

The Assessing Officer further noted that a similar pattern of investment in share application money was found for the financial year 2011-12 relevant to the assessment year 2012-13, and that the facts and issues had been elaborately discussed in paragraph 5 of the assessment order for that year. The Assessing Officer recorded his respectful agreement with those findings and relied upon them for the year under consideration as well. Reference is invited to paragraph 7 at page 7 of the assessment order.

10.

Accordingly, an addition of Rs 3,21,78,367 was made under section 68 of the Act as unexplained cash credit, and the total assessed income for the assessment year 2008-09 was computed at Rs 3,40,71,927. Reference is invited to paragraph 7(a) at page 7 of the assessment order.

11.

Aggrieved by the reassessment order, the respondent preferred an appeal before the learned Commissioner of Income Tax (Appeals) on 31st January 2017 in Form No. 35, raising grounds that the reassessment proceedings were bad in law being based on a change of opinion, that the addition under section 68 was unjustified on merits, and that interest under sections 234B and 234C had been wrongly charged.

12.

During the pendency of the appeal, the respondent raised additional grounds on 12th May 2023, specifically contending that the Assessing Officer had erred in initiating reassessment proceedings without recording a finding as required under the first proviso to section 147 of the Act, and that the reassessment was based on a change of opinion in the absence of any tangible material.

13.

The learned Commissioner of Income Tax (Appeals), vide the impugned order dated 18th December 2024, held that there had been no failure on the part of the respondent to disclose fully and truly all material facts necessary for the assessment, that the reassessment amounted to a mere change of opinion, and that the notice under

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section 148, having been issued beyond four years from the end of the relevant assessment year, was illegal and unsustainable in law. The reassessment order was accordingly cancelled and the grounds relating to the merits of the addition were left unadjudicated as academic. Reference is invited to paragraphs 6.1.1 to 6.1.30, 7 and 8 at pages 47 to 63 of the impugned order.

14.

Being aggrieved by the said order, the Department has preferred the present appeal on the grounds set out in Form No. 36, involving a total tax effect of Rs 96,53,510.

B. SUBMISSIONS ON GROUNDS OF APPEAL

GROUND NO. 1

1.

It is respectfully submitted that the original assessment order dated 22nd July 2010 shows that the respondent had merely furnished a list of shareholders along with their shareholding and permanent account numbers, without disclosing the identity, creditworthiness or genuineness of the share application money received, and without disclosing that the money had in fact been routed through paper companies. This position is recorded by the learned Commissioner of Income Tax (Appeals) himself at paragraph 6.1.16 at page 57 of the impugned order.

2.

It is well settled that disclosure of primary facts alone does not exhaust the requirement of full and true disclosure where the true character and quality of a transaction remains suppressed. In Commissioner of Income Tax versus P.V.S. Beedies Private Limited, (1999) 237 ITR 13, the Supreme Court held that where a fact bearing on the correctness of the assessment, though embedded in the record, was not disclosed in its true perspective at the time of the original assessment. its subsequent discovery constitutes a valid ground for reopening.

3.

Similarly, in Phool Chand Bajrang Lal versus Income Tax Officer, (1993) 203 ITR 456, the Supreme Court held that where an assessee had shown a cash credit in its books and the primary fact of the entry was disclosed, but the true nature of the transaction, namely that it represented an accommodation entry, was discovered subsequently, the Assessing Officer was entitled to reopen the assessment, and mere disclosure of the existence of the entry did not amount to full and true disclosure of the material facts. The ratio of this decision applies squarely to the facts of the present case, since the true character of the share application money as the respondent's own unaccounted money routed through Kolkata based paper companies was discovered only during the investigation carried out in the course of the assessment proceedings for the assessment year 2012-13, and

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was not disclosed by the respondent at the time of the original assessment.

4.

It is submitted that Explanation 1 to section 147 of the Act expressly provides that mere production of books of account or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the section. The furnishing of names and permanent account numbers of shareholders, without more, falls squarely within this explanation and cannot be treated as full and true disclosure.

5.

The finding of the learned Commissioner of Income Tax (Appeals) that there was no failure to disclose is accordingly contrary to the material on record and to the settled legal position, and deserves to be reversed.

GROUND NO. 2

1.

The concept of change of opinion, as explained by the Supreme Court in Commissioner of Income Tax versus Kelvinator of India Ltd, (2010) 320 ITR 561, presupposes that an opinion was in fact formed by the Assessing Officer on the very issue during the original assessment proceedings. It is respectfully submitted that no such opinion was ever formed in the present case.

2.

The original assessment order dated 22nd July 2010 is wholly silent on the question of identity, creditworthiness and genuineness of the share application money, and merely records acceptance of the returned income after the respondent furnished a list of shareholders. There is no discussion, express or implied, on this issue anywhere in the said order. In the absence of any application of mind to this specific aspect, there could not have been any opinion formed in the first instance, and consequently there could be no change of opinion in the eyes of law.

3.

This position finds support in the decision of the Full Bench of the Delhi High Court in Commissioner of Income Tax versus Usha International Ltd, (2012) 348 ITR 485, wherein it was held that where the assessment order itself does not disclose application of mind to the particular item or claim, it cannot be presumed that the Assessing Officer had examined the issue merely because relevant material was available in the return or in response to a query, and that the bar of change of opinion applies only where the issue had actually been examined.

4.

It is also submitted that the Supreme Court in Income Tax Officer versus Techspan India Private Limited, (2018) 6 SCC 685, itself relied upon by the learned Commissioner of Income Tax (Appeals) at

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paragraph 6.1.8 at pages 49 to 51 of the impugned order, has held that before interfering with a reopening on the ground of change of opinion, it must first be verified whether the earlier assessment order, expressly or by necessary implication, expressed an opinion on the very matter forming the basis of the alleged escapement, and that where the assessment order is non speaking, cryptic or perfunctory, it would be difficult to attribute any such opinion to the Assessing Officer. Applying this very test laid down in the judgment relied upon by the learned Commissioner of Income Tax (Appeals), the original assessment order in the present case being wholly silent on the issue, no opinion can be attributed to the Assessing Officer, and the finding of change of opinion recorded at paragraph 6.1.30 at page 61 of the impugned order therefore cannot be sustained.

GROUND NO. 3

1.

It is respectfully submitted that the reasons recorded need not employ the precise statutory phrase failure to disclose fully and truly all material facts, provided the substance of the reasons, read as a whole, discloses such failure. This principle has been laid down by the Delhi High Court in Consolidated Photo and Finvest Limited versus Assistant Commissioner of Income Tax, (2006) 281 ITR 394, wherein it was held that reasons recorded ought to be read fairly and sensibly, and that an omission to use the precise words of the statute does not vitiate the reopening where the escapement is attributable to a failure to make a full and true disclosure.

2.

In the present case, the reasons recorded, extracted at paragraph 6.1.12 at pages 55 and 56 of the impugned order, expressly state that the respondent had furnished only the permanent account numbers and addresses of the persons concerned, and that evidence on record showed that unexplained cash credits in the form of so called share application money were in fact deposited by the respondent company itself in the names of various persons and brought back in the form of share capital. This is a clear and categorical statement that the true nature of the transaction was not disclosed by the respondent, and the substance of failure to disclose fully and truly all material facts is very much present in the reasons so recorded, even though the precise phrase may not have been used verbatim.

3.

The finding of the learned Commissioner of Income Tax (Appeals) that the absence of the specific phrase is fatal to the reopening therefore places undue emphasis on form over substance and deserves to be set aside.

GROUND NO. 4

1.

It is respectfully submitted that the requirement of tangible material, as explained in Commissioner of Income Tax versus

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Kelvinator of India Ltd, (2010) 320 ITR 561, is fully satisfied in the present case. The material which formed the basis of reopening was the specific finding, arrived at during independent enquiry conducted in the course of assessment proceedings for the assessment year 2012-13, that the concerns named as share applicants, namely M/s Ceja Traders Private Limited, M/s Nabaratna Vinimay Private Limited, M/s Debdaru Vinimay Private Limited, M/s Arcade Dealcom Private Limited and M/s Vanila Vinimay Private Limited, were Kolkata based paper companies without any real business or financial strength, as recorded in paragraphs 5 and 6 at pages 5 to 7 of the assessment order. This finding was not before the Assessing Officer at the time of the original assessment and constitutes specific, reliable and tangible information within the meaning of section 147 of the Act.

2.

The Supreme Court in Phool Chand Bajrang Lal versus Income Tax Officer, (1993) 203 ITR 456, has held that where information is received subsequent to the original assessment, whether from an external source or from investigation, disclosing that a transaction represented an accommodation entry rather than a genuine transaction, the Assessing Officer is entitled to reopen the assessment of the earlier year, since such information amounts to tangible material and its use for reopening does not amount to a mere change of opinion.

3.

The learned Commissioner of Income Tax (Appeals) has himself acknowledged, at paragraph 6.1.20 at page 59 of the impugned order, that the Assessing Officer placed reliance on facts gathered during the assessment proceedings for the assessment year 2012-13. The finding that this material was insufficient, merely because the identity of the shareholders was already on record, overlooks the settled position that it is not the identity of the shareholder but the discovery of the true and paper character of the investing concern which constitutes the tangible material justifying reopening.

GROUND NO. 5

1.

It is respectfully submitted that the learned Commissioner of Income Tax (Appeals), having cancelled the reassessment order solely on the legal issue of validity of reopening, declined to examine the correctness of the addition of Rs 3,21,78,367 made under section 68 of the Act on merits, treating the grounds relating thereto as academic. Reference is invited to paragraph 7 at page 62 of the impugned order.

2.

It is submitted that once the finding on the validity of reopening is reversed for the reasons set out under Grounds No. 1 to 4 above, the substantive grounds relating to the addition under section 68 of the Act require independent adjudication on merits, since they were never examined by the learned Commissioner of Income Tax (Appeals). In the interest of justice, and since findings on identity, creditworthiness

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and genuineness of the share applicants involve appreciation of facts and evidence, it is submitted that the matter be restored to the file of the learned Commissioner of Income Tax (Appeals) for adjudication of the grounds relating to the merits of the addition, in the event this Honourable Tribunal upholds the validity of the reopening.

GROUND NO. 6

1.

It is respectfully submitted that the first proviso to section 147 of the Act bars reopening beyond four years from the end of the relevant assessment year only where the original assessment was completed under section 143(3) and there was no failure on the part of the assessee to disclose fully and truly all material facts. For the reasons already set out under Ground No. 1 above, it is submitted that there was in fact a failure on the part of the respondent to disclose the true nature of the share application money, and the bar under the first proviso to section 147 is accordingly not attracted.

2.

It is further submitted that at the stage of reopening, the sufficiency or correctness of the reasons recorded by the Assessing Officer cannot be examined by the appellate authority, and only the existence of a prima facie belief based on some material has to be seen. This principle has been laid down by the Supreme Court in Raymond Woollen Mills Ltd versus Income Tax Officer, (1999) 236 ITR 34, and in Income Tax Officer versus Selected Dalurband Coal Company Private Limited, (1996) 217 ITR 597. The learned Commissioner of Income Tax (Appeals), by undertaking a detailed reappreciation of the sufficiency of the reasons recorded, has exceeded the limited scope of enquiry permissible at this stage.

GROUND NO. 7

1.

It is respectfully submitted that the two limitations under section 147 of the Act operate on entirely distinct fields. The bar of change of opinion applies only where an opinion was actually formed by the Assessing Officer on the very issue in the original assessment, whereas the bar under the first proviso applies only where full and true disclosure was in fact made by the assessee. Neither limitation is attracted in the present case, since, as submitted under Ground No. 2 above, no opinion was ever formed on the issue of genuineness of the share application money in the original assessment, and, as submitted under Ground No. 1 above, no full and true disclosure of the true nature of the transaction was ever made by the respondent.

2.

The learned Commissioner of Income Tax (Appeals) has proceeded to apply both limitations cumulatively without appreciating that the very premise for invoking either bar is absent in the facts of this case, and the impugned order therefore conflates two distinct legal concepts and misapplies them to the facts on record.

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GROUND NO. 8 AND GROUND NO. 9

1.

It is respectfully submitted that the impugned order additionally suffers from the infirmity that the learned Commissioner of Income Tax (Appeals) has placed reliance, at paragraphs 6.1.20 and 6.1.29 at pages 59 to 61 of the impugned order, upon the order of this Honourable Tribunal in the respondent's own case for the assessment year 2012-13, wherein the addition made on merits was deleted on the ground that the first proviso to section 68 of the Act, which casts a burden on a closely held company to prove the source of funds in the hands of the share applicant, applies only from the assessment year 2013-14 onwards and was accordingly held inapplicable to the earlier year. That finding was rendered on the merits of an addition under section 68 for a different assessment year and under a different statutory provision, and cannot have any bearing on the entirely distinct question of the validity of reopening for the assessment year 2008-09 presently in appeal.

2.

It is a settled principle that each assessment year is a separate and self-contained unit of assessment, and a decision rendered for one assessment year on a distinct question does not operate as a bar or as res judicata for another assessment year. This principle has been recognised by the Supreme Court in New Jehangir Vakil Mills Company Limited versus Commissioner of Income Tax, (1963) 49 ITR 137. The reliance placed by the learned Commissioner of Income Tax (Appeals) on the order for the assessment year 2012-13 to hold that there was no failure to disclose for the assessment year 2008-09 is accordingly misconceived.

3.

For all the reasons set out hereinabove, it is respectfully submitted that the impugned order of the learned Commissioner of Income Tax (Appeals) is erroneous in law and on facts and deserves to be set aside.

PRAYER

1.

It is most respectfully prayed that this Honourable Tribunal may be pleased to set aside the order of the learned Commissioner of Income Tax (Appeals) dated 18th December 2024, restore the reassessment order dated 30th December 2016 passed under section 143(3) read with section 147 of the Income Tax Act, 1961, and remand the matter to the learned Commissioner of Income Tax (Appeals) for adjudication of the grounds relating to the merits of the addition under section 68 of the Act, which were left unadjudicated as academic.

2.

Any other relief which this Honourable Tribunal may deem fit and proper in the facts and circumstances of the case may kindly also be granted.”

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Submission of Ld. AR :

4.

The Ld. AR filed petition under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963.

4.1 The Ld. AR filed written submissions which is as under : “1- The present appeal has been filed by the Revenue against the order passed by the learned CIT(A)/NFAC under section 250 of the Income- tax Act, 1961 dated 18.12.2024, whereby the reassessment proceedings initiated under sections 147/148 and the consequential assessment framed under section 143(3) read with section 147 were quashed as invalid and without jurisdiction.

2- It is respectfully submitted that the impugned order of the learned CIT(A) is a detailed, reasoned and legally sustainable order passed after examining the assessment records, reasons recorded, original scrutiny proceedings and settled judicial principles. There is no error pointed in the impugned order. The grounds raised by the Revenue are contrary to facts and law and deserve to be rejected.

A. BRIEF FACTS

1- The respondent-assessee company filed its return of income for A.Y. 2008-09 on 29.09.2008 declaring income of Rs.13,96,630/-. The assessment was completed under section 143(3) on 22.07.2010 determining income at Rs. 18,93,560/-.

2- During the original scrutiny assessment, the Assessing Officer had specifically examined the issue of share capital/share application money. Necessary notices were issued and the assessee furnished complete details including names of shareholders, PAN, addresses and supporting documents. After due verification, the Assessing Officer accepted the explanation and no addition was made on this issue.

3- Subsequently, after expiry of four years from the end of the relevant assessment year, notice under section 148 was issued on the basis of the very same material already available on record. The reasons recorded did not contain any allegation or satisfaction that income had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts as mandated by the first proviso to section 147. Further, the approval granted under section 151 was undated.

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4- The reassessment was completed under section 143(3) read with section 147 making an addition of Rs.3,21,78,367/- under section 68 on account of alleged unexplained share application money.

5- In appeal, the learned CIT(A), after examining the reasons recorded and the original assessment records, held that:

the reopening was beyond four years;

there was no allegation of failure on the part of the assessee to disclose fully and truly all material facts;

the issue had already been examined during the original scrutiny assessment; and

the reassessment was based merely on change of opinion without any fresh tangible material.

6- Accordingly, the reassessment proceedings and consequential assessment order were quashed.

B. REASSESSMENT JURISDICTION BEYOND FOUR YEARS IS WITHOUT

1- The first proviso to section 147 clearly mandates that where an assessment has been completed under section 143(3), reopening beyond four years is permissible only if income escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

2- In the present case, the original assessment was completed on 22.07.2010, whereas reasons for reopening were recorded on 30.03.2015, i.e., beyond four years from the end of A.Y. 2008-09. Therefore, compliance with the first proviso to section 147 was mandatory.

3- The learned CIT(A) has categorically found that the reasons recorded do not contain any satisfaction regarding failure on the part of the assessee to disclose material facts fully and truly. Jurisdiction under section 147 must be tested strictly on the basis of reasons recorded and cannot be supplemented subsequently through inference or arguments.

4- The approval granted under section 151 is also undated, rendering the assumption of jurisdiction further invalid, particularly when limitation expired on 31.03.2015.

5- Therefore, the learned CIT(A) rightly held the reassessment proceedings to be barred by limitation and without jurisdiction.

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C- REOPENING IS BASED ON MERE CHANGE OF OPINION

1- The issue of share application money was specifically examined during the original scrutiny proceedings. The Assessing Officer had called for details, examined the replies and thereafter consciously accepted the claim.

2- Once a specific issue has been examined in scrutiny assessment, reopening on the same material amounts merely to review of the earlier decision, which is impermissible in law.

3- The learned CIT(A) has correctly recorded that no new tangible material came into possession of the Assessing Officer and reopening was only on reappraisal of the same material already available during original assessment proceedings.

4- Accordingly, the reassessment is clearly hit by the doctrine of "change of opinion".

D. GROUND-WISE REPLY TO REVENUE'S GROUNDS OF APPEAL (a) Ground No. 1 The Revenue has assailed the finding of the learned CIT(A) that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The said ground is wholly misconceived and deserves to be rejected. The learned CIT(A), after examining the recorded reasons, has returned a categorical factual finding that the Assessing Officer had nowhere recorded the mandatory satisfaction contemplated under the first proviso to section 147. In absence of such jurisdictional satisfaction, reopening beyond four years is legally unsustainable. (b) Ground No. 2 The Revenue contends that reassessment was initiated on the basis of a fresh belief formed upon analysis of existing facts. The very contention defeats the Revenue's own case. Reassessment founded merely upon re- analysis or reinterpretation of material already available on record does not constitute "fresh tangible material". It is nothing but a review of the earlier assessment on the same facts, which is impermissible and squarely hit by the doctrine of change of opinion. (c) Ground No. 3 The Revenue has argued that even if the exact expression "failure to disclose fully and truly all material facts" is absent in the reasons recorded, reassessment would still be valid if such failure can be inferred from the surrounding circumstances. The contention is

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contrary to settled law and deserves outright rejection. In cases where reopening is initiated beyond four years from the end of the assessment year after completion of scrutiny assessment under section 143(3), the reasons recorded must themselves expressly demonstrate the Assessing Officer's satisfaction regarding failure on the part of the assessee to make full and true disclosure of material facts. Jurisdiction cannot be assumed on implied reasoning, inferential satisfaction or subsequent explanations. The Hon'ble Jurisdictional High Court in the case of Harom Ingots has reiterated this settled principle. (d) Ground No. 4 The Revenue has further contended that reassessment was supported by new tangible material. This contention is directly contrary to the findings recorded by the learned CIT(A). The learned CIT(A), after examining the assessment records and the reasons recorded, has specifically held that no fresh fact or tangible material had emerged subsequent to the original assessment and that the Assessing Officer merely revisited the very same material which had already been examined during scrutiny proceedings. (e) Ground No. 5 The allegation of the Revenue that the reassessment was quashed merely on technical or procedural grounds is entirely misconceived. The condition prescribed under the first proviso to section 147 is not a procedural formality but a substantive jurisdictional requirement. Compliance with such condition is mandatory for valid assumption of jurisdiction beyond four years. Failure to satisfy the statutory requirement renders the entire reassessment proceedings void ab initio. (f) Ground No. 6 The Revenue has contended that reopening beyond four years was valid as the reasons allegedly indicated failure on the part of the assessee to disclose fully and truly all material facts. The contention is factually incorrect and contrary to the record. The reasons recorded do not point out any specific omission, suppression or non-disclosure by the assessee. All primary facts relating to share application money had already been disclosed during the original scrutiny assessment and were duly examined by the Assessing Officer. This factual finding recorded by the learned CIT(A) remains uncontroverted. (g) Ground No. 7

The Revenue has lastly contended that the learned CIT(A) failed to appreciate the distinction between "change of opinion" and "failure to disclose fully and truly all material facts". The contention is without

15 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

merit. The learned CIT(A) has correctly appreciated and independently applied both legal principles. The reassessment was rightly held invalid on two separate and independent grounds, namely:

1.

absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment; and

2.

reopening based merely on reappraisal of the same material already examined during the original scrutiny assessment, amounting to change of opinion.

The respondent relies on the case laws cited as per compilation of case laws. On the basis of facts, evidences, submissions and settled legal position, the respondent humbly prays that the Hon'ble Tribunal may be pleased to confirm order of ld. CIT(Appeals) and dismiss the Revenue's appeal in the interest of justice.”

4.2 The Ld. AR relied on the following case laws : i. Hariom Ingots and Power Pvt. Ltd. v. PCIT (2022) 444 ITR 306 (Chhattisgarh) (HC) ii. Asstt. Commissioner of Income Tax 1(2), Raipur Vs Maruti Clean Coal & Power Ltd. Hira Arcade, Pandri Raipur (CG) and vice-versa and Deputy Commissioner of Income Tax 1(2), Raipur Vs Maruti Clean Coal & Power Ltd. 2018 (3) TMI 1948 - ITAT Raipur iii. PCIT vs L&T Ltd. (Bombay High Court) 2019 (1) TMI 1698- Bombay High Court iv. ACIT vs. ETC Industries Ltd., the Hon'ble ITAT Indore Bench [(2012) 150 TTJ 0527] v. CIT vs. Peoples General Hospital Ltd. reported in (2013) 356 ITR 0065 (MP) vi. Lotus Integrated Taxpark Ltd. vs. DCIT, reported in (2015) 173 TTJ 0848 (Chd) vii. CIT vs Gagandeep Infrastructure Pvt. Ltd. 2017 (3) TMI 1263 (BOMBAY- HC) viii. CIT vs LOVELY EXPORTS (PVT) LTD 2008 (1) TMI 575 - (SC)

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ix. M/s Rajshree Finsec Pvt Ltd vs ACIT ITA NO.545/2010 (ITAT-Indore) order dated 06.02.2012 x. CIT vs STL Extrusion (P) Ltd [2011] 11 taxmann.com 125 (MP) xi. CIT vs Vaibhav Cotton (P.) Ltd [2013] 36 taxmann.com 429 (Madhya Pradesh) xii. ACIT vs Venkateshwar Ispat (P.) Ltd [2009] 319 ITR 393 (Chhattisgarh- HC) xiii. Deputy Commissioner of Income Tax 1(1), Raipur Versus M/s Rose Merchants Pvt. Ltd. 2019(9) TMI 616 - SC Order xiv. Deputy Commissioner of Income- Tax, Raipur Versus Pushpak Merchants Pvt. Ltd. 2018 (11) TMI 1687 Chhattisgarh High Court xv. M/S. Hirak Vyapaar Pvt. Ltd. Versus ITO, Ward-6 (1), Kolkata 2023 (4) TMI 692 ITAT Kolkata xvi. Principal Commissioner of Income Tax-4 Versus M/s Himachal Fibres Ltd. 2018 (3) TMI 672 Delhi High Court xvii. Sona Power Private Limited Versus the Assistant Commissioner of Income Tax, Central-2, Raipur 2023 (3) TMI 1348 - ITAT Raipur xviii. Income Tax Officer-4 (1), Raipur Versus M/s. Sharda Shree Agriculture & Developers Pvt. Ltd. 2022 (8) TMI 454 - ITAT Raipur xix. J.S. Parkar Vs. V.B. Palekar High Court of Bombay [1974] 94 ITR 616 (Bombay).

Findings and Analysis :

5.

We have heard both the parties and perused the records. In this case, the assessee company had filed return of income for AY 2008-09 electronically on 29.09.2008 declaring total income at Rs.13,96,630/-. Then, the return was revised on 14.03.2009 showing total income at Rs.17,24,970/-. As per

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assessment order, the assessee’s case was selected for scrutiny with the approval of Chief Commissioner of Income Tax dated 23.09.2009 and accordingly, notice u/s 143(2) was issued on 24.09.2009. Then, subsequently, various notices were issued. The assessee’s Authorized Representative attended the hearings and filed the details as called for. It is mentioned in the assessment order, books of account and allied records were examined on test check basis. Finally, the assessment order was passed u/s 143(3) on 22.07.2010 assessing the total income at Rs.18,93,560/- with disallowances of certain expenses. The assessment order u/s 143(3) dated 22.07.2010 was passed by the Dy. CIT-1(1), Bhilai. Copy of the said assessment order is at pages 1-3 of the paper book.

5.1 Notice u/s 148 was issued for AY 2008-09 on 31.03.2015 and served on 01.04.2015. The reasons recorded by the Dy. CIT-1(1), Bhilai (AO) were provided to the assessee vide letter dated 01.07.2015. Copy of the same has been filed at pages 199-200 of the paper book. The reasons recorded are as under: “During the course of assessment proceedings in the case of LNS Industries Pvt. Ltd. AY 2012-13 it is noticed that balance sheet as at 31-03-2012 shows share application money at Rs. 18,85,50,572/- pending for allotment of shares. The details of outstanding share application money are as under:

S. No. Name of the parties (S/Shri) Amount 1 Abhinav Khasgiwala Rs. 2,48,000/- 2 Ansar Ahemad Saiyad Rs.7,00,00,000/- 3 J.K. Jain Rs. 50,000/- 4 J.N. Gupta Rs. 1,77,32,205/- 5 Narendra Agrawal Rs. 1,00,000/- 6 Nimish Agrawal Rs. 8,30,000/- 7 Neha Agrawal Rs. 9,00,000/- 8 Rekha Agrawal Rs. 45,70,917/- 9 Ruhi Agrawal Rs. 25,00,000/- 10 Sunil Agrawal Rs.5,62,46,450/- 11 MSA Consultants Rs.3,04,00,000/- 12 R.K. Enterprises Rs. 50,00,000/- 13 Total Rs.18,85,50,572/-

18 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

Out of so called share application money of Rs. 18,85,50,572/-, Rs.3,21,78,367/- was received during the F.Y.2007-08 relevant to A.Y.2008-09 from various persons. During the course of assessment proceedings for AY 2012-13, the assessee company was required to prove the

(1) Identity of the applicant's for share application money

(2) genuineness of the share application money

(3) creditworthiness of these applicants for share application money with documentary evidence.

(4) To produce share register

(5) To produce copies of share application form

(6) To produce documentary evidence about mode of receipt of share application money.

(7) To produce documentary evidence about the address of the applicants for share application money.

(8) To produce copies of I.T. returns of the applicants for share application money.

During the course of assessment proceedings for AY 2012-13 the assessee company has furnished only PAN number and address of the above persons. No PAN no. of M/S MSA Consultants was provided on the ground that it is a foreign entity. No other compliance was made by the assessee company to prove the genuineness of the so called share application money. No document to prove the creditworthiness of the above persons were filed. Neither Share register was produced for verification nor share application form were produced. No details such as mode of receipt of share application money was filed. The copies of I.T. return, Balance sheet etc. were not filed on the ground of personal information. Notice u/s 133(6) of IT Act, 1961was issued to the subscriber for so called share application money to produce the details but the same were not complied.

The assessee was specifically required to produce the copy of application form filed by the above named persons for allotment of shares. The assessee company kept silent on this issue. No compliance was made by the assessee company. As such it was not possible to verify as to whether these persons have really applied for the allotment of shares and has paid share application amount and the mode of receipt of share application money. Further the assessee is a limited company having its authorized capital at Rs.5.00 crores as on 31-3-2012, out of this authorized capital Rs.1.04 crores was

19 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

subscribed and shares were issued. Thus, the company was having only shares worth Rs.2.96 crores pending for allotment, whereas the assessee company has accepted share application money worth Rs. 18.85 crores and kept it pending for allotment without any reasonable cause. No satisfactory reply for keeping such huge share application money pending for allotment has been given by the assessee company during the course of assessment proceedings. The assessee company has also accepted the share application money from foreign entity i.e. M/S MSA Consultant during the F.Y.2007-08. The assessee company was required to state as to whether the Reserve Bank of India's regulation relating to acceptance of foreign funds were followed. The assessee company has not brought on record any piece of paper to show that assessee company has applied for increase in share capital or has taken steps for allotment of shares out of existing shares pending for allotment.

Thus the assessee company has failed, to prove the identity, genuineness and creditworthiness of the persons who have applied for allotment of so called shares. Merely producing PAN number or assessment particulars did not establish the identity of the persons. PAN numbers are allotted on the basis of application without actual de facto verification of the identity or ascertaining business activities. PAN number is relevant but cannot be relied upon blindly and without considering surrounding circumstances.

Considering the submissions made by the assessee company and after examination of the evidence produced during the course of assessment proceedings relating to source of so called share application money amounting to Rs.3,21,78,367/-deposited during the year, the claim of the company that share application money was deposited has not been proved. On the contrary, the evidence on the record shows that the unexplained cash credits in the form of so called share application was deposited by the assessee company itself in the name of various persons. Therefore, I have reason to be believe that income amounting to Rs.3,21,78,367/- has escaped the assessment for A.Y.2008-09 within the meaning of Sec. 147of IT Act, 1961.”

5.2 The assessee filed letter stating that the return filed by the assessee on 14.03.2009 may be treated as return in response to notice u/s 148 of the Act. Then, the assessee filed various replies. The AO passed a common re-assessment order for AYs 2008-09, 2009-10 2010-11 and 2011-12 on 30.12.2016 u/s 143(3) r.w.s. 147 of the Act. The AO made addition of Rs.3,21,78,367/- u/s 68 of the Act for AY 2008-09. Aggrieved

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by the assessment order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 18.12.2024 for AY 2008-09 allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue has filed an appeal before this Tribunal and the assessee filed petition under Rule 27 of the ITAT, Rules.

6.

The Ld. CIT(A) has allowed the assessee’s appeal by holding that the notice u/s 148 of the Act issued beyond four years from the end of the assessment year was bad in law. The relevant paragraphs of the Ld. CIT(A) are reproduced here as under : “6.1.16 It is an undisputed fact that the details were called with respect to share capital from the assessing officer in the assessment completed for the assessment year 2008-09 completed on 22/7/2010 by not making any additions, in para 4of the assessee submission filed before the assessing officer during the original assessment proceedings, which is made part of the paper book, page No. 90, the relevant part of which is reproduced here below

Sub: Assessment Proceeding U/s 143(3) for A. Y. 2008-09.

Respected Sir

With reference to above, we beg to submit as under for your kind & favorable consideration

1.

The Assessee is engaged in Trading of Cigarette, Safety Match Boxes & Liasoning Works etc during the previous year relevant to A.Y. under consideration.

2.

Directors report on the annual accounts of the Company is enclosed herewith for your kind perusal

3.

The Key Persons are as under: a) b) c) List of is encl Detail Sunil Kumar Agrawal. 1/45, Nehru Nagar, Bhilai. Smt. Rekha Agrawal, 1/45, Nehru Nagar, Bhilai. Nimish Agrawal, 1/45, Nehru Nagar, Bhilai.

4.

Share Holders having their shareholdings in the company with their income tax identity enclosed herewith for your kind perusal.

21 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

5.

of Reserve & Surplus shown in the Balance Sheet are as under :-

6.1.18 Although the reasons recorded by the assessing officer for the current assessment year, it appears that the appellant has submitted the same details which were submitted by the appellant during the original assessment proceedings concluded on 22/07/2010 with respect to the shareholders. There is no mention in the reasons recorded regarding new material unearthed by Assessing officer during proceedings for the AY 2012-13 which is distinct from what's filed by the appellant in earlier proceedings concluded which points out to either income escaping assessment. In this background, it appears that the assessing officer has not found any material evidence which is different from what was relied upon by the assessing officer during the original assessment proceedings. The details of the share holders were already submitted before the assessing officer completing the original assessment under section 143(3) and the same details were submitted to the assessing officer completing the assessment for the assessment year 2012-13. There appears to be no tangible information or new information which is relied on by the assessing officer as per the reasons recorded by him for the current assessment year while reopening.

6.1.19 The assessing officer in the last para of the reasons recorded has stated that evidence on record shows that unexplained cash credits in the form of so-called share application was deposited by the appellant company itself in the name of various persons. On going through the reasons recorded or the assessment order passed under section 147 rws 143(3), it has not been established by the assessing officer that the appellant has brought in his unaccounted money in the form of share capital using the entities as shareholders as alleged by him. The assessing officer has failed to prove this finding of round tipping in either the reasons recorded or the assessment order. It appears from the assessment order that this finding is based on finding during assessment proceedings for AY 2012-13.

6.1.20 Ongoing through the assessment order for the AY 2008-09, it appears that the assessing officer has placed high reliance assessment proceedings on facts and analysis and discussions in the assessment on details gathered during the order for the year 2012-13. It is pertinent to note that Hon'ble ITAT in its order dated 16 April 2018, for the assessment year2012-13 has deleted the additions made and appeal has been decided in favour of the appellant.

6.1.25 The allegation of the appellant is that assessing officer did not recorded in satisfaction about failure on part of the appellant to disclose fully and truly all material facts necessary for assessment for the assessment year. After going through the reasons recorded, it appears that the assessing officer has not established in the reasons

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recorded that there was failure on part of the appellant to disclose fully and truly all facts necessary for its assessment for the assessment year. In the proceeding concluded for the assessment year 2008-09 completed on 22/07/2010. The assessing officer during the course of assessment proceedings had enquired into the aspect of share application money. The appellant in its reply before the assessing officer has submitted the details with respect to permanent account number and addresses of the shareholders. Being satisfied with the details submitted, the Assessing officer accepted the contentions of the appellant on share capital in the proceedings concluded for the assessment year 2008-09 completed on 22/07/2010. In this background it is very clear that the assessing officer who completed the assessment proceedings under section 143(3) on 22/07/2010 of the Income-tax Act, had issued a notices and the appellant in response to him had submitted that the details. The assessing officer based on the replied filed by the appellant with respect to various issues including that of the shareholders had accepted the contention of the appellant and was satisfied with the submissions of the appellant. If not the assessing officer would have issued further the notices and called for various other details and if he had not been satisfied he would have brought the amounts to tax in the original assessment for the assessment year 2008- 09 completed on 22/07/2010. The fact that the assessing officer has accepted the returned income or he has not brought to tax the income with respect to share capital, signifies that the assessing officer was satisfied with the submissions of the assessee and there was no mistake on part of the assessee during the original assessment proceedings to disclose truly and fully all material facts necessary for its assessment for the assessment year. For arguments sake, if we have to find out if any new facts had to come to establish that income had escaped assessment within the meaning of section 147 read with section 148 of the Income-tax Act,, it appears from the reasons recorded by the assessing officer that no such facts have come to light as verified from reasons or findings in Assessment order for the AY 2008-09. The assessing officer in the reasons recorded has not brought out any such new facts or tangible material for reopening.

6.1.26 The Assessing officer in the reasons has alleged that appellant has routed his money in cash to the form of shares using the modus operandi of share application. High reliance is placed by the assessing officer on all the investigations made by the assessing officer during the course of assessment year 2012-13. Even the additions made for the various assessment years including the current assessment year, reliance is placed by the assessing officer all facts narrated and the conclusion that he draws in the order for the assessment year 2012-13. The hon-ble ITAT being the highest fact finding authority has given the finding that it is not the case that the appellant has bought the amount of share capital by cheque by paying cash. Based on the decision of the Honble ITAT in the

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appellant own case it is clear that the reason given by the assessing officer's when he alleges that appellant has brought back his own money as share capital based on the assessment order for AY 2012- 13 is wrong and without basis in back ground of Honble ITAT decision in favour of appellant. As the reasons recorded do not point out towards any mistake on part of the appellant to disclose fully and truly all material facts necessary for the assessment, the reopening appears to be not as per law.

6.1.27 The one more issue in the objections filed by the appellant with respect to change in opinion of the assessing officer. The assessment for the assessment year 2008-09 was completed on 22/07/2010, the assessing officer had enquired into the issue of share capital vide notice issued on 24/09/2009 and reply filed by the assessee before the assessing officer is part of the paper book as annexure 3. The appellant has submitted list of shareholders along with shareholding in the company along with PANs. As the assessing officer felt that he was satisfied with the replies filed by the assessee and no action was considered necessary, the issue had appeared finality. The contention of the assessee is that such concluded proceedings cannot be reopened without any tangible material and in absence of tangible material constitutes change of opinion which is not permissible as per law. The appellant has relied on various case laws in this regard. As discussed above it appears that on same set of facts and details available with the assessing officer who had completed the assessment during assessment year 2008-09 completed on 22/7/2010 and also during recording of reasons similar details were relied on. in my opinion there is no scope for assessing officer to reopen the assessment, as it is established in the ratio laid down by Hon'ble courts that power of the assessing officer is to reassess if income has escaped assessment and not to review the assessment. The assessing officer has not brought on record any tangible material which led to its conclusion that there has been income escaping assessment within the meaning of section 147 read with section 148 of the Income-tax Act, for the said assessment year in the assessment completed on 22/7/2010. As there is no tangible material pointing out to income escaping assessment, based on the same material, which was there before the original assessment under section 143(3), this also amounts to change in the opinion. The assessing officer is not correct to reopen the assessment because there is change of opinion.

6.1.28 Now coming to the last issue in the reopening reasons. In the reopening reasons, the assessing officer comes to a conclusion that the appellant during the current assessment year, has brought in his own unaccounted income back to the books as share capital. He has also relied solely on the investigations conducted during the scrutiny proceedings for the assessment year 2012-2013 and the information gathered during this proceedings have been used for the scrutiny assessment for the assessment year 2012-13 and for reopening for

24 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

the assessment year 2008-09, 2009-10 and assessment year 2010- 11. As discussed, paragraph the investigation done by the assessing officer for the assessment year 2012-13, has been decided by Hon'ble ITAT in the order for the said assessment year has deleted the addition is made and has stated that the issue of share capital received by the appellant company is genuine. The order also has deleted all the additions made by the AO and has given the finding that there is no case that appellant has brought in his own unaccounted money in the form of share capital. Further it is clarified and held in the said order that during the said assessment year including the current assessment year the source of the source cannot be questioned as the provisions to question the source of the source with respect to share capital are applicable from assessment year 2013 14 onwards.

6.1.29 The basis of reopening for the current assessment year is from the investigations conducted during the assessment year 2012-13 and the belief to record the reasons why the assessing officer in the reasons recorded also are because of the fact that assessee has ploughed back is unaccounted money as share capital through various entities. This fact has not been brought on record either in the reasons with the assessment order and without basis. This basis has been proved by honble ITAT order in the Assesses own case for AY 2012-13. Even on this count, the assessing officer is wrong.

6.1.30 In view of the above submissions, observations, and judicial precedents, I am of the considered opinion that there has been no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment. Further it is held that there was change in opinion on part of the AO in issuing reassessment notice after investigation in AY 2012-13 relying on same material relied by AO during original 1143(3) proceedings which amounts to change in opinion in background of absence of new tangible material. Consequently it is held that the issuance of the notice under section 148 of the Act, after the expiry of four years from the end of the relevant assessment year, is patently illegal and unsustainable in law and hence the reassessment order passed pursuant to such notice is cancelled.”

7.

In this case, the Ld. CIT(A) has held that the AO has not recorded satisfaction that the assessee has failed to disclose truly and fully all material facts necessary for assessment. In this case, admittedly, the assessment order for AY 2008-09 was passed u/s 143(3) on 22.07.2010. Admittedly, the notice u/s 148 of the Act has been issued after a lapse of four years from

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the end of the assessment year. The Ld. CIT(A) has referred to the notice issued during original assessment proceedings wherein the AO has specifically asked about the Share Application Money. The Ld. CIT(A) has reproduced the relevant part of the notice u/s 142 asking specific question about Share Application Money. It is an admitted fact by Revenue that during the Original Assessment proceedings the Assessee had filed List of persons who has invested as Share Application money during the year. The assessee had also filed PAN of those persons. The Ld. CIT(A) has also reproduced the reasons recorded for reopening. We have carefully studied all these documents and noted that the AO nowhere mentioned about “failure of the assessee to file all necessary documents during the assessment proceedings”. As per proviso to section 147 of the Act, no notice u/s 148 shall be issued after an expiry of four years from the end of the assessment year where order u/s 143(3) was passed unless income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Thus, after expiry of four years from the end of the assessment year, it is mandatory for the AO to analyze whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this case, the AO in the reasons recorded has nowhere analyzed that the assessee during original assessment has failed to disclose truly and fully all material facts. Rather, in this case, during original assessment specific question was asked by the AO regarding Share Application Money. The assessee filed elaborate reply to the notice u/s 142(1) during original assessment proceedings. Assessee had filed list of persons who provided Share Application money during the year along with their PAN.

26 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

8.

In the reassessment order dated 30.12.2016 the AO has mentioned names of the persons who provided share application money to the assessee for AY 2008-09. The said list is as under: Name of the Persons Amount Nimish Agrawal Rs.1,68,000/- Rekha Agrawal Rs.51,95,917/- Ruhi Agrawal Rs.2,04,50,000/- Sunil Agrawal Rs.13,64,450/- Ceja Traders Pvt. Ltd. Rs.50,00,000/- Total Rs.3,21,78,367/-

However, in the reasons recorded for AY 2008-09, the AO has mentioned that PAN of MSA Consultant was not provided stating that it’s a foreign entity. On perusal of the records and the reassessment order, it is observed that MSA Consultant has not made any investment in the assessee company during AY 2008-09. This explains that the AO has not bothered to verify the basic facts and merely relying on the assessment order for AY 2012-13 recorded the reasons for reopening. Rather, in the reasons recorded, the AO has not mentioned the specific names of alleged share applicant for AY 2008-09 and their respective investments. It means, at the time of recording the reasons for AY 2008-09, the AO was not aware or has not bothered to verify the specific details pertaining to AY 2008-09. In the entire reasons recorded for reopening, the AO has not even referred to or mentioned about the original assessment order passed for AY 2008-09. The entire discussion in the reasons recorded for reopening is about AY 2012-13.

9.

In this context, we will discuss the proposition of law laid down by the Hon’ble High Courts and ITAT.

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10.

The Hon’ble Bombay High Court has held in the case of Hindustan Lever Ltd vs R B Wadkar 268 ITR 332 (Bombay) as under : Quote, “20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self- explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.

21.

Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside” Unquote.

11.

Hon’ble Bombay High Court in the case of First Source Solutions ltd v/s ACIT 438 ITR 139 (Bom) has held as under :

28 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

Quote, “ 11. Therefore, when the assessment is sought to be reopened after the expiry of period of four years from the end of the relevant year, the proviso to section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. This stipulation does not govern a notice for reopening within a period of four years. In the case at hand, as noted earlier, there is not even a whisper about what fact was not disclosed. In our view, therefore, the notice to reopen under section 148 of the said Act itself was issued without jurisdiction. Consequently, the order passed also cannot be sustained. ” Unquote.

12.

Hon’ble Chhattisgarh High Court in the case of Hariom Ingots and Power Pvt Ltd vs PCIT WPT 56 of 2022 (2022)444 ITR 306(Chhattisgarh) which has been relied by the Ld.AR and filed copy in the paper book, held as under : “…. Under first proviso to section 147 of the I.T. Act , for starting the reassessment proceedings after a lapse of 4 years , Assessing Officer has to record his conclusion that there was failure on the part of assessee in not disclosing fully and truly all material facts necessary for assessment of that particular assessment year, which is not appearing from the reading of the Annexure i.e. reasons for issuance of notice……….. 7…………Issuance of notice under section 148 of the I.T. Act to petitioner is not in accordance with the first proviso to section 147 of the I.T. Act , therefore, it is not sustainable, which is liable to be quashed and it is hereby quashed.”

Hon’ble Chhattisgarh High Court is the Hon’ble Jurisdictional High Court in this case.

13.

Similar view has been taken by the ITAT, Raipur in the case of Rajesh Agrawal Vs. Deputy Commissioner of Income Tax in ITA No. 268/RPR/2026 has held as under : Quote, “4. That as evident from the aforestated documents the notice under Section 148 of the Act has been issued beyond 4 years and in the reasons recorded by the Assessing Officer there is no whisper regarding any failure on the part of the assessee to disclose truly and fully the material facts. That the 1st proviso to Section 147 of the Act would be applicable for A.Y. 2010-11. That if the reopening has to be done beyond the period of 4 years the Revenue demonstrate that there is failure on the part of the assessee in disclosing fully and truly all material facts relevant for the assessment. Further, the Hon’ble

29 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

Jurisdictional High Court in the case Hariom Ingots and Power Pvt. Ltd. vs. PCIT (2022) 444 ITR 306 (C.G.) had held that for issuance of notice under Section 148 there should be tangible material and mandatory compliance of Section 147 of the Act. Proceedings of reassessment initiated after lapse of 4 years of submission of return and as per 1st Proviso to Section 147 for supporting such reassessment proceedings after lapse of 4 years the Assessing Officer has to record his conclusion that there was failure on the part of the assessee is not disclosing fully and truly all material facts necessary for assessment. That when there was no satisfaction available with the Assessing Officer with regard to the 1st Proviso of Section 147 of the Act in such scenario issuance of notice under Section 148 of the Act itself is vitiated, bad in law hence liable to be quashed. The Writ Petition of the assessee was allowed by the Hon’ble Jurisdictional High Court. Similar view had been upheld in the decision of ITAT Raipur Benchin ITA No. 478/Rpr/2025 for A.Y. 2013-14 order dated 25.08.2025 in the case of Earthstahl & Alloys Limited vs. ITO.” Unquote.

14.

The Ld. DR has relied on the decision of Hon’ble Delhi High Court in the case of Consolidated Photo and Finvest Limited vs ACIT 281 ITR 394. However, this decision is distinguishable on facts and in the case of Consolidated Photo and Finvest Limited, the AO in the reasons has referred to the regular assessment order. Also, we have referred to the decision of Hon’ble Chhattisgarh High Court which is the Hon’ble Jurisdictional High Court in this case. Therefore, the decision of Hon’ble Chhattisgarh High Court is binding on us. We have also referred to the decision of Hon’ble Bombay High Court on identical facts. When two divergent decisions on identical facts are available of Hon’ble High Courts then decision favorable to the assessee needs to be followed as held by Hon’ble Supreme Court in the case of Vegetable Products.

15.

We have already in earlier paragraphs has held that the AO in the reasons recorded has not brought on record any failure of the assessee to disclose truly and fully all material facts necessary for the assessment during original assessment proceedings. As per proviso to section 147 of the Act after a

30 ITA No.85/RPR/2025, LNS Industries Pvt. Ltd.

lapse of four years from the end of the assessment year, it is mandatory for the AO to record assessee’s failure to disclose truly and fully all material facts necessary for the assessment. In these facts and circumstances of the case, respectfully following Hon’ble Chhattisgarh High Court which is the Hon’ble Jurisdictional High Court in this case, Hon’ble Bombay High Court and ITAT Raipur (supra), we hold that the notice u/s 148 is bad in law. Accordingly, for the reasons mentioned above, we uphold the order of Ld. CIT(A) on this issue. Accordingly, the Ground Numbers 3, 5 and 6 raised by the Revenue are dismissed for the above discussed reasons.

16.

Since, we have upheld the order of the Ld. CIT(A) quashing the notice u/s 148 of the Act for the reasons discussed above, rest other grounds are academic only.

17.

In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the open Court on 26 October, 2026

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER

पुणे/Pune; िदनांक/Dated : 26-10-2026 Ravi Kumar आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. 3. The concerned Pr. CIT, Pune 4. DR, ITAT, Raipur Bench, Raipur गाड� फाईल / Guard file. 5. आदेशानुसार/ BY ORDER, SAMIRAN Digitally signed by SAMIRAN BERA // // True Copy // BERA Date: 2026.10.29 16:12:51 +05'30' Assistant Registrar आयकर अपीलीय अिधकरण,पुणे/ITAT, Pune

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