CHAMPALAL RAICHAND CHOUHAN,MUMBAI vs. THE ASSISTANT C.I.T.,CIRCLE 16(2),, MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: C BEFORE SAKTIJIT DEY, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 2523/MUM/2026 (िनधा�रण वष�/Assessment Year: 2014-2015) Champalal Raichand Chouhan The Assistant C.I.T.,Circle 16(2), Shop No. 4 Habib Terrace, Aayakar Bhavan, Dr. Ambedkar Road, Mumbai-400002, Lalbaug, Maharashtra Vs. Mumbai-400012, Maharashtra अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AATPC7742G

अपीलाथ� �ारा/Appellant represented by: Shri Dharan Gandhi and Ms. Vinita Nara, Advocates ��थ� �ारा/Respondent represented by: Shri Ajay Soneji, Sr. DR

सुनवाई की तारीख / Date of conclusion of hearing: 27.07.2026 घोषणा की तारीख / Date of pronouncement: 19.10.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order passed by ld. CIT(A), National Faceless Appeal Centre Delhi, DIN & Order No. ITBA/NFAC/S/250/2025-26/1085213810(1), dated 28.01.2026 against the assessment order passed by Assessment Unit Income Tax Department u/s 147 r.w.s. 144B. of the Income Tax Act 1961 (hereinafter referred to as the “Act”) dated 29.05.2023 for AY 2014-15. 2. Assessee has raised following grounds of appeal:

1.1 The Hon’ble CIT(A)-NFAC erred in confirming the validity of issue of notice u/s.148 of the Income-tax Act, 1961 and passing the order u/s.143(3) r.w.s. 147 of the Income-tax Act, 1961. The reopening is bad, illegal, void and against the provision of law and natural justice; 1.2 The Ld. CIT(A) failed to adjudicate that the notice issued u/s.148 is not in accordance with the ‘e-Assessment of Income Escaping Assessment Scheme, 2022’ (“the faceless scheme”). The issuance of notice u/s.148 is bad, illegal, void, against the provisions of law and without jurisdiction; 2.1 The CIT(A)-NFAC ought to have appreciated that the appellant has disclosed fully and truly all material facts necessary for the assessment during first assessment; 3.1 Without prejudice to above, The Hon’ble CIT(A)-NFAC failed to appreciate that the Appellant was not confronted with the material, evidences, etc. which were relied upon by the AO while framing the assessment; The Hon’ble CIT(A)-NFAC ought to have appreciated that in the facts and the circumstances of the case, and in law, the assessment so framed be held as bad and illegal, as the same is framed in flagrant breach of the principles of natural justice. 4.1 Without prejudice to above, The Hon’ble CIT(A)-NFAC failed to appreciate that the transaction of purchase and sale of shares as carried out by the appellant is genuine transaction and not bogus entry as alleged; 4.2 The Hon’ble CIT(A)-NFAC failed to appreciate that the AO has relied on irrelevant facts, conjectures, surmises and assumptions and is arbitrary; 4.3 The Hon’ble CIT(A)-NFAC failed to appreciate that there is no evidence on record conclusively proving that the transaction is bogus as alleged;

2.1. Ground Nos. 1.1, 1.2, 2.1 and 3.1 challenge validity of reopening and of assessment framed pursuant thereto. Ground Nos. 4.1 to 4.3 challenge addition made on merits. We take up the legal grounds first.

“7. With reference to transaction code 502(National/Multi Commodity Exchange-Contract Of Rs.10 Lacs Or More For Sale Or Prchase In The Exchange), agency name Bombay Stock Exchange Limited, I submit as under:” Script Name Remarks Sr. Transaction Transaction No. Amount(Rs.) Date 1. 2,36,900/- 05-Sep-13 Ravinay Trading Shares sold Qty:200(Note Co.(BSE) No.1) 2. 2,05,000/- 26-Aug-13 Ravinay Trading Shares sold Qty:200(Note Co.(BSE) No.1) 3. 2,05,500/- 18-Sep-13 Ravinay Trading Shares sold Co.(BSE) Qty:1500(NoteNo.1) 4. 2,05,500/- 18-Sep-13 Ravinay Trading Shares sold Co.(BSE) Qty:1500(NoteNo.1) 5. 2,05,500/- 18-Sep-13 Ravinay Trading Shares sold Co.(BSE) Qty:1500(NoteNo.1) 6. 3,17,074/- 18-Sep-13 Ravinay Trading Shares sold Co.(BSE) Qty:2334(NoteNo.1) 7. 2,05,000/- 26-Aug-13 Ravinay Trading Shares sold Qty:200 Co.(BSE) (Note No.1) 8. 2,05,000/- 26-Aug-13 Ravinay Trading Shares sold Qty:200 Co.(BSE) (Note No.1) 9. 2,05,000/- 26-Aug-13 Ravinay Trading Shares sold Qty:200 Co.(BSE) (Note No.1) 10. Ravinay Trading 2,05,000/- 26-Aug-13 Shares sold Qty:200 Co.(BSE) (Note No.1)

Note 1: The transactions of sales reflected above are including of brokerage charges charged by the broker, which have been excluded by me from sales consideration i.e. the sales consideration taken by me is net off the amount of brokerage paid to broker. The same can be verified by the contract notes. For all aforesaid transactions, I am enclosing contract notes. Capital gains on the said transaction are duly considered by me in computation of total income.”

3.1. Assessment was sought to be reopened on information received from Investigation Wing available on Insight portal. This information was consequent to search and survey action on syndicate of persons led by Shri Naresh Jain on 19.03.2019. The information carried value of Rs. 4,30,93,055/- for FY 2013-14. Approval u/s 151 was obtained on 30.03.2021. Ld. AO recorded reasons and issued notice u/s 148 dated 21.04.2021. Assessee filed return on 26.04.2021, reporting total income at Rs. 5,15,64,319/- and objected to the notice so issued.

3.2. Hon’ble Supreme Court in Union of India v. Ashish Agarwal (2022) 444 ITR 1 (SC) dated 04.05.2022 directed that notices u/s 148 issued under the old law be treated as notices u/s 148A(b). Ld. AO accordingly issued letter dated 25.05.2022. Assessee replied on 08.06.2022. Ld. AO passed order u/s 148A(d) on 29.07.2022 and issued notice u/s 148 on the same date. Ld. AO thereafter issued notices u/s 142(1) and show cause notice dated 19.05.2023. Assessee replied to the show cause notices. However, ld. AO made addition of Rs. 4,29,46,942/- being entire sale consideration of shares as unexplained money u/s 69A r.w.s. 115BBE, while completing the impugned reassessment.

Sl. Purchase of Ravinay Trading Sale of Ravinay Trading Company Profit/Gain No. Company Limited shares Limited shares Date No. of Amount Date No. of Amount Amount shares shares 1 19/04/2012 17500 25,00,910/- 26/08/2013 2000 20,43,054/- 3,79,40,826/- 07/05/2012 15500 25,05,205/- 05/09/2013 2000 23,52,646/- 18/09/2013 15000 20,38,576/- 18/10/2013 30000 41,85,658/- 21/10/2013 30000 40,96,210/- 22/10/2013 30000 41,10,514/- 22/10/2013 30000 40,81,227/- 25/10/2013 20000 26,44,904/- 30/10/2013 30000 29,54,209/- 06/11/2013 25000 32,47,391/- 12/11/2013 20000 26,31,145/- 18/11/2013 10000 12,55,753/- 20/11/2013 5000 6,12,893/- 02/12/2013 10000 12,81,611/- 03/12/2013 25000 30,52,917/- 04/12/2013 10000 13,52,917/- 33000 50,06,115/- TOTAL 294000 4,29,46,942/- 3,79,40,826/-

4.1. Ld. AO recorded in paras 3.3.2 and 3.3.3 that assessee booked exempt LTCG of Rs. 3,79,40,827/- on sale of shares of NYSSA Corporation Ltd. It is further recorded that assessee had purchased 33,000 preference shares from Ravinay Trading Company Limited during FY 2013-14 for Rs. 50,06,115/-. Ld. AO noted that balance 29,000 shares were split in ratio of 1:10 and assessee received 2,90,000 shares of NYSSA Corporation Ltd. which were sold during FY 2013-14.

4.2. Ld. AO referred to the search action on Shri Naresh Jain and to seven scrips identified by the Investigation Wing as manipulated. NYSSA Corporation Ltd is at Sl. No. 1 of the list. Ld. AO relied on statement of Shri Naresh Jain recorded u/s 132(4) wherein it was admitted that share prices of various scrips were manipulated to provide bogus entries of long term capital gain and short term capital loss and business loss. Ld. AO recorded that the Investigation Wing had found the company to be a paper company with no real business activity. To corroborate these findings, ld. AO studied financials and price movement of the scrip using data from BSE and moneycontrol.com.

4.3. Ld. AO observed that reported profits of the company were not commensurate with the price rise. It was further observed that sharp price rise was not supported by fundamentals. He concluded on the basis of in-depth investigation by the Investigation Wing that rigging and manipulation was carried out in the scrip through stock exchange by a syndicate of operators and promoters. According to ld. AO, transactions in the scrip were nothing but manipulated ones for giving fictitious entries to various beneficiaries and to show those transactions as genuine. Ld. AO did not accede to request of assessee for cross examination and relied on judicial decisions for that purpose. Ld. AO held that transactions in shares of NYSSA Corporation Ltd were sham and manipulated and added entire sale consideration of Rs. 4,29,46,942/- as unexplained money.

3497 of 2019 dated 20.12.2021. Hon’ble High Court held that where on consideration of material on record, one view is conclusively taken by ld. AO, it is not open to reopen the assessment on the very same material with a view to taking another view. 6.2. Second contention is that reasons recorded do not mention any specific scrip in which assessee dealt. Reasons are general and vague. They refer to search and survey action on Shri Naresh Jain on 19.03.2019 and to certain penny stocks taken note of therefrom. Nothing specific is pointed out as to which of those penny stocks assessee dealt in and which led to escapement of income of Rs. 4,30,93,055/-. Ld. Counsel referred to the order u/s 148A(d) wherein no specific details of any transaction undertaken by assessee are mentioned. The relevant para is extracted below for ready reference: “9. Further, the assessee also contended that all the transactions in shares were carried out through demat account on the platform BSE & NSE, payments were made through banking channels which are reflected in bank statement. Therefore, the share transactions were genuine. From the reply of the assessee, it is seen that the assessee other than his bold assertion that it had carried on genuine share transactions, no reply has been made. In the reply, the assessee has reiterated that he has bought and sold the shares through recognized stock exchange and the payments were reflecting in the bank statement. As it has been discussed in the reason for reopening the entire transaction is a pre-arranged sham transaction with an intention to convert the unaccounted money by using colourable devices. When the entire transaction itself is a pre-arranged sham transaction, then merely transacting through recognized stock exchange or by making cheque payments, will not concretely rebut the allegations leveled against the assessee. Support is drawn from the decision of the Hon’ble Calcutta High Court in the case of CIT Vs M/s Precision Finance Pvt Ltd reported at 208 ITR 465, wherein it was held that “Mere payment by account payee cheque is not a sacrosanct nor can it make that view of the matter, the question before us is answered in the negative and in favour of the revenue.” 6.2.1. Ld. Counsel further relied on observations of Hon’ble jurisdictional High Court in Harish Gangji Dadia v. Union of India and others in Writ Petition No. 1065 of 2022 dated 29.03.2022. Para 10 of the decision is extracted below:

“10. Reading this, nobody can make out or atleast we are unable to make out any demonstrable link between the information and the formation of belief. This paragraph does not even indicate what was the trading activity during the year that the petitioner was involved in or from what shares or derivatives the petitioner is alleged to have made huge profit. How can someone be expected to respond to such vague charges?” 6.2.2. Hon’ble High Court thus, found that there was no demonstrable link between the information and the formation of belief. The reasons did not indicate the trading activity undertaken during the year or the shares or derivatives from which huge profit was alleged. Hon’ble High Court observed that no one can be expected to respond to such vague charges.

6.3. Third contention is on limitation. Ld. Counsel submitted that four years had elapsed from the end of AY 2014-15 when the first notice u/s 148 was issued. Original assessment having been made u/s 143(3), reopening beyond four years was permissible only if income escaped assessment by reason of failure of assessee to disclose fully and truly all material facts necessary for assessment. Reasons recorded by ld. AO do not mention any such failure. He relied on decision of Hon’ble High Court of Delhi in Sapphire Foods India Limited v. ACIT (2026) 183 taxmann.com 506 (Del.). The decision notes that s. 149(1) as it existed prior to year 2021, barred notice u/s 148 where four years but not more than six years had elapsed from the end of relevant Assessment Year unless income chargeable to tax which escaped assessment amounted to or was likely to amount to Rs. 1 lakh or more for that year.

6.4. Fourth contention is that the issue is squarely covered by the decision of Hon’ble jurisdictional High Court in Gateway Leasing (P.) Ltd. v. ACIT [2020] 117 taxmann.com 442 (Bom). Ld. Counsel submitted that in this case also reopening was initiated on the basis of search action on Shri Naresh Jain on 19.03.2019 as recorded in para 18 of the judgment. We shall discuss the same in our findings.

6.5. Last legal contention is that no material relied upon by ld. AO was furnished to assessee. Ld. Counsel referred to letter dated 25.05.2022 issued by ld. AO u/s 148A(b) pursuant to order of Hon’ble Supreme Court in Ashish Agarwal (supra). Hon’ble Supreme Court had directed that information and material relied upon by Revenue be provided to assessee. In para 4 of the letter, ld. AO stated that the information suggesting escapement of income and the reference material forming basis of such information are embedded in reasons recorded under the old regime. Thus, no material was supplied. Assessee by letter dated 08.06.2022 asked for supply of documents and other evidence including statement of Shri Naresh Jain or any other person. Assessee also asked for opportunity of cross examination to make rebuttal. Ld. Counsel relied on decision of Hon’ble jurisdictional High Court in Dada Akbarbhai Sindkhedawala v. ACIT in Writ Petition (L) No. 30778 of 2023 dated 23.01.2024 which held that where reassessment proceedings are based upon material gathered during search survey and investigation proceedings, copies of such relied upon material are required to be furnished to assessee so as to enable effective rebuttal before passing order u/s 148A(d). Failure to furnish relied upon material amounts to violation of principles of natural justice. He also referred to s. 142(3) which mandates statutory procedural compliance of giving assessee an opportunity of being heard in respect of material proposed to be utilized for assessment.

6.6. On the basis of above contentions, ld. Counsel submitted that reopening was not in accordance with provisions of the Act and that reassessment is liable to be quashed.

7.1. On merits, ld. Counsel submitted that assessee furnished following before ld. AO in reassessment proceedings: (i) statement showing details of long term capital gain (ii) contract notes for purchase and sale of shares (iii) relevant bank statements highlighting payment made for purchase as well as for sale of shares and amounts received on sale (iv) copy of global report issued by Samurai Securities Private Limited for FY 2012-13 and FY 2013-14 and copy of account with Samurai Securities Private Limited for the said two years.

7.1. He explained that share transactions were genuine and carried through stock exchange. Payments and receipts were made through account payee cheques. Shares were purchased on 19.04.2012 and 07.05.2012 and sold during August 2013 to December 2013 after holding period of 16 to 19 months. He further pointed out that ld. AO recorded wrongly in the assessment order that assessee purchased preference shares during FY 2013-14. Assessee purchased equity shares during FY 2012-13. Ld. AO also recorded wrongly that shares were obtained on preferential basis at nominal price. Shares were purchased on BSE at market prices.

7.2. Ld. Counsel referred to decision of coordinate bench in Naresh Manakchand Jain v. ACIT in ITA Nos. 247 & 240 to 244/Mum/2023 dated 27.06.2024. This is the case of Shri Naresh Jain on whom search action took place on 19.03.2019, leading to reopening in the case of assessee. The said decision covers AY 2014-15 also. As recorded in the decision, appeals for AYs 2013-14 to 2017-18 arose from assessments completed consequent to search on 19.03.2019. Coordinate bench held that statements of Shri Naresh Jain and of third parties could not be the basis of addition without corroboration by incriminating material found in search and that no such material was referred by ld. AO. Coordinate bench thus, held that no incriminating material was found to sustain addition in the hands of Shri Naresh Jain.

7.3. Ld. Counsel also referred to annual report of NYSSA Corporation Limited for the year ended 31.03.2014. Statement of profit and loss shows revenue from operations of Rs. 12,36,97,180/- and profit before tax of Rs. 2,65,37,238/-. Statement of profit and loss and relevant notes giving details of reserves and secured borrowings from bank and components of income from operations and other income and costs incurred on business activities are extracted below for ready reference:

A. Statement of profit and loss for the year ended on 31.03.2014: Particulars F.Y. 2013-14 F.Y. 2012-13 Note No I. Revenue from Operations 17 123,697,180 323,603,780 II. Other Income 18 7,447,933 1,787,091 III. Total Revenue (I +II) 131,145,113 325,390,871 IV. Expenses: 19 82,117,489 94,970,544 Cost of Land, Plots & Constructed Properties & Development Rights Purchase of Stock-in-Trade 20 41,705 17,895,992 21 12,139,752 163,311,178 Change in inventories of finished goods & work in progress Employee Benefit Expense 22 2,035,808 1,507,080 Financial costs 23 6,335,914 148,622 Depreciation & Amortisation 24 24,336 25,326 Other Expenses 25 1,912,872 1,288,658 Total Expenses 104,607,876 279,147,399 (III - IV) 26,537,238 46,243,472 V. Profit before exceptional and extraordinary items and tax VI. Exceptional Items - - (V - VI) 26,537,238 46,243,472 VII. Profit before extraordinary items and tax VIII. Extraordinary Items - - IX. Profit Before Tax 26,537,238 46,243,472 (VII - VIII) 4,600,000 9,550,000 X. Tax Expense: (1) Current Tax - Income Tax 116,302 59,641 (2) Earlier Year Tax - Short/(Excess) Provision of Tax (3) Deferred Tax (1,784) 10,286 (4) MAT Credit entitlement (10,977,652) - (IX-X) 32,800,371 36,623,546 XI. Profit(Loss) from the period from continuing operations XII. Earning per equity share: (1) Basic 1.09 12.21 (2) Diluted 1.09 12.21 26 Significant Accounting Policies & Notes on Accounts B. Note : 2 Reserve & Surplus (In ₹) Particulars As at 31.03.2014 As at 31.03.2013 Sr. No 1 1,024,970 1,024,970 Capital Reserve As Per Last Balance sheet 2 42,750,000 42,750,000 Securities Premium Reserve As Per Last Balance sheet 3 80,113,465 43,489,918 Profit and loss Account As Per Last Balance sheet Add: Profit for the year 32,800,371 36,623,546 Amount available for Appropriation 112,913,837 80,113,465 Less: Appropriations - - Balance in Profit & Loss 112,913,837 80,113,465 Total 156,688,807 123,888,435

C. Note : 3 Long Term Borrowings (In ₹) Particulars As at 31.03.2014 As at 31.03.2013 Sr. No 1 Secured United Bank of India 68,503,537 25,031,236 Less: Maturity with in one year shown in note no. 7 under Other Current Liabilities. 43,472,301 2 Unsecured Deposits 3,030,000 Total 46,502,301 - Nature of Security: 1. Secured by mortagage of three Commercial Shop 6,17 and 18 located at “Aum Supreme” Old Bail Bazar, Opp. H P Petrol Pump, Kalyan West, District-Thane D. Note : 17 Income from Operations Particulars F.Y. 2013-14 F.Y. 2012-13 Sr. No 1 Sale of Shares 1,07,25,040 1,88,38,851 2 Sale of FSI - 8,00,16,000 3 Sale of Flats & offices 11,29,72,140 22,47,48,929 Total 12,36,97,180 32,36,03,780

E. Note : 18 Other Income Particulars F.Y. 2013-14 F.Y. 2012-13 Sr. No 1 Dividend Income 1,35,716 1,44,279 2 41,51,123 15,40,595 Profit from Partnership Firm-Mark Developers 3 Discount Received 17,419 3,366 4 Balances written-off - 98,851 5 Interest Received 75,042 - 6 Rent Income 30,48,633 - 7 Other Income 20,000 - Total 74,47,933 17,87,091

F. Note : 19 Cost of Land, Plots & Constructed Properties & Development Rights Particulars F.Y. 2013-14 F.Y. 2012-13 Sr. No 1 Building Lift 54,04,569 22,49,400 2 Building Material 30,28,148 26,92,570 3 Cement 44,30,706 63,04,451 4 Consultancy Charges 3,58,957 10,50,202 5 Door & Door Frames 5,28,172 15,12,300 6 Electrical Material 31,37,350 - 7 Electrical Work 13,29,189 40,56,037 8 Electricity Expenses 15,16,900 11,00,490 9 Fire Fighting 15,07,500 - 10 Flooring Materials 34,22,834 18,81,316 11 Glazing Work Labour Charges - 21,57,472 12 Glazing Works 20,44,561 59,51,528 13 Granite 9,02,171 9,44,931 14 KDMC Charges 11,700 27,05,844 15 Open Land Tax 12,37,558 - 16 Other Expenses 80,49,212 20,77,060 17 Paint and Putty Exp. 27,29,180 6,29,235 18 Plumbing & Water Proofing Works 74,07,585 7,39,098 19 Property Tax 2,88,413 12,48,412 20 RCC Contractor's Charges 2,55,03,007 2,87,48,303 21 Siporex Blocks 10,29,032 25,16,459 22 Staircase Making Charges 98,290 3,64,242 23 Steal 19,84,792 1,48,58,194 24 TDR Cost - 30,00,000 25 Tenant Cost - 57,01,000 26 Tiles Fixning Charges 44,72,945 6,23,751 27 Transportaion Charges 6,34,005 9,83,485 28 Transportation of Building Materials 10,60,714 8,74,764 Total 8,21,17,489 9,49,70,544

8.1. On validity of notice, ld. Sr. DR relied on the order of ld. CIT(A). Cases were selected for reopening on the basis of risk management strategy and e-Verification Scheme 2021 and were flagged to the jurisdictional assessing officer. Jurisdictional assessing officer and faceless assessment unit have concurrent jurisdiction. Notification dated 29.03.2022 does not oust jurisdiction of jurisdictional assessing officer to issue notice u/s 148. Notice was therefore validly issued. Ld.

Sr. DR submitted that reopening and addition were therefore, valid and prayed that appeal of assessee be dismissed.

9.1. The original assessment was completed u/s 143(3) on 14.12.2016, accepting income as returned. Details of sale and purchase of shares in the scrip were furnished by assessee by reply dated 15.07.2016. Point No. 7 of the reply extracted at para above shows that transaction wise details of sale of shares were furnished. It also shows that contract notes were enclosed and that capital gains on these transactions were considered in computation of total income. Thus, all primary facts relating to the impugned transaction were before ld. AO in the original assessment proceedings.

9.2. The reasons recorded by ld. AO notes that return was filed and that scrutiny assessment was made u/s 143(3). Ld. AO adds “However, this matter was not taken up at that time.” This does not say that assessee failed to furnish any detail. It only says that ld. AO did not take up the matter at that time. The information from Investigation Wing relates to the modus operandi of a syndicate. It does not point out any primary fact furnished by assessee to be false. Hon’ble jurisdictional High Court in Infinity.com Financial Securities Limited (supra) held in para 5 that where one view is conclusively taken on material on record, it is not open to reopen the assessment on the same material to take another view. The material relating to the transaction in shares was already on record in the present case. Reopening for taking a different view on such material is a case of change of opinion.

9.3. We now come to the contention that reasons are vague. Reasons recorded refer to search action on Shri Naresh Jain on 19.03.2019 and to certain penny stocks. We do not find in the reasons, any mention of the scrip in which assessee dealt. Nothing is brought out to link assessee with any of those penny stocks. The figure of Rs. 4,30,93,055/- appears without any nexus to any transaction of assessee. Even in the order u/s 148A(d) extracted above, ld. AO only states that as discussed in the reasons, the entire transaction is a pre-arranged sham. No detail of any transaction undertaken by assessee is given. Date, quantity and price of any trade are not mentioned. Ld. AO proceeds to say that payment by cheque is not sacrosanct. That is a conclusion drawn without identifying the transaction.

9.3.1. Observations of Hon’ble jurisdictional High Court in Harish Gangji Dadia (supra) extracted in para above apply with equal force. The reasons there did not indicate the trading activity or the shares from which profit was alleged. Hon’ble High Court found no demonstrable link between information and formation of belief. In the present case also, reasons recorded do not indicate the scrip or the trade or the amount which according to ld. AO escaped assessment. Assessee cannot be expected to respond to such vague charges. We hold that there is no live link between the information and the belief formed.

9.4. We now come to the contention on limitation. AY 2014-15 ended on 31.03.2015. Four years from the end of the AY expired on 31.03.2019. The first notice u/s 148 was issued on 21.04.2021 which is after expiry of four years. Original assessment having been made u/s 143(3), the first proviso to s. 147 as it stood prior to 01.04.2021 applies. It reads as under: “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:”

9.4.1. Thus, after four years, ld. AO could reopen only if income escaped assessment by reason of failure of assessee to disclose fully and truly all material facts. Reasons recorded do not carry any allegation of such failure. Hon’ble High Court of Delhi in Sapphire Foods India Limited (supra) considered the scheme of s. 147 and s. 149 as they stood prior to 2021. In absence of any allegation of failure on the part of assessee and in view of full disclosure made in original assessment proceedings, the jurisdictional condition of the first proviso to s. 147 is not satisfied.

9.4.2. In view of the statutory scheme prior to 2021 as reflected in Sections 149(1) and 147, where an assessment under Section 143(3) has been framed, no notice under Section 148 can be issued after the expiry of four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose fully and truly all material facts. In the present case, since all necessary material disclosures were made by the assessee during the original assessment proceedings, the extended period of limitation does not apply, rendering notices issued beyond the 4-year limit barred by limitation.

9.5. We now take up decision of Hon’ble jurisdictional High Court in Gateway Leasing (P.) Ltd. (supra). In that case assessee filed return for AY 2012-13 and assessment was completed u/s 143(3) on 28.03.2015. Notice u/s 148 was issued on 31.03.2019. Reasons recorded were that search and seizure action was carried out on Shri Naresh Jain on 19.03.2019 by the Investigation Wing. Search revealed a syndicate which generated bogus long term capital gain and bogus short term capital loss and bogus business loss for various beneficiaries. As per para 4.2, the reasons listed twelve scrips used by Shri Naresh Jain. NYSSA Corporation Ltd. is at Sl. No. 5 of that list. Out of these, seven scrips are listed by ld. AO in the assessment order before us, in which manipulation has been carried out. Thus, the reopening in that case and in the present case stems from the same search action and the same information.

9.5.1. Hon’ble High Court noted that during the original assessment proceedings, several notices u/s 142(1) were issued and assessee furnished details with documentary evidence. The assessment order recorded that details were called for and examined and that representative of assessee attended proceedings and filed details with explanations. Revenue contended that mere furnishing of details of purchase and sale of shares did not amount to full and true disclosure unless the real colour of transactions was disclosed. Hon’ble High Court did not accept this contention and held as under: “36. First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under section 143 (3) of the Act. Thus it would appear that Petitioner had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. He had also explained whatever queries were put by the Assessing Officer with regard to the primary facts during the hearings. 37. In such circumstances, it cannot be said that Petitioner did not disclose fully and truly all material facts necessary for the assessment. Consequently, Respondent No. 2 could not have arrived at the satisfaction that he had reasons to believe that income chargeable to tax had escaped assessment. In the absence of the same, Respondent No. 2 could not have assumed jurisdiction and issued the impugned notice under section 148 of the Act.”

9.5.2. Facts of the present case are similar. Assessee furnished transaction wise details of sale of shares and contract notes in the original assessment proceedings by reply dated 15.07.2016. Scrutiny assessment was completed thereafter. Ld. CIT(A) held that disclosure of contract notes and DMAT statements does not amount to full and true disclosure, if later investigation shows those documents to be part of a premeditated scheme. This is the very contention of Revenue which was not accepted by Hon’ble High Court in Gateway Leasing (P.) Ltd. (supra). Duty of assessee is to disclose primary facts truly and fully. Assessee did so. It was for ld. AO to draw the correct inference. Hon’ble High Court also held in para 38 that reasons recorded cannot be supplemented subsequently. Ld. CIT(A) has gone beyond the reasons by referring to statements of key operators and seized records and a list of beneficiaries. Nothing on record shows that these were part of the reasons recorded or were ever furnished to assessee. Respectfully following the decision of Hon’ble jurisdictional High Court, we hold that ld. AO could not have assumed jurisdiction u/s 147.

9.6. Now we come to the last contention that no material relied upon was furnished to assessee. Hon’ble Supreme Court in Ashish Agarwal (supra) directed that information and material relied upon by Revenue be provided to assessee to enable reply. Ld. AO issued letter dated 25.05.2022. In the letter ld. AO stated that the information and the reference material are embedded in reasons recorded under the old regime. Thus, nothing beyond the reasons was furnished. Assessee by letter dated 08.06.2022 specifically asked for documents and evidence including statement of Shri Naresh Jain or any other person and sought opportunity of cross examination. Nothing was furnished. Ld. AO passed order u/s 148A(d) on 29.07.2022 and issued notice u/s 148.

9.6.1. In Dada Akbarbhai Sindkhedawala (supra), Hon’ble jurisdictional High Court held that where reassessment proceedings are based upon material gathered during search survey or investigation proceedings copies of such relied upon material must be furnished to assessee. This is to enable effective rebuttal before order u/s 148A(d) is passed. Failure to furnish relied upon material violates principles of natural justice. Following this decision, this Tribunal has held in similar facts that non- furnishing of relied upon material strikes at the root of jurisdiction assumed by ld. AO. Assessee is thereby deprived of effective opportunity contemplated u/s 148A(b). Reassessment proceedings cannot be sustained where assessee was not confronted with the underlying material forming basis of reopening.

9.6.2. Section 142(3) provides that assessee shall except where assessment is made u/s 144 be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub- section (2) or audit under sub-section (2A) and proposed to be utilised for the purposes of assessment. In the assessment order, ld. AO relied on statement of Shri Naresh Jain recorded u/s 132(4) and on findings of Investigation Wing. Ld. AO declined cross examination. Nothing on record shows that such statement or findings were furnished to assessee. Ld. CIT(A) held that several notices were issued and sufficient opportunity was given. Issue of notices calling for reply is not the same as furnishing of material proposed to be used against assessee. Opportunity of being heard on an undisclosed material is no opportunity at all. We find the view of ld. CIT(A) not tenable.

9.7. Considering all of the above, we hold that reopening was not in accordance with the provisions of the Act. Reopening is based on change of opinion, on material already disclosed. Reasons recorded are vague and without live link. There is no allegation of failure to disclose fully and truly all material facts after expiry of four years. The issue is covered by decision of Hon’ble jurisdictional High Court in Gateway Leasing (P.) Ltd. (supra). Relied upon material was not furnished to assessee in violation of principles of natural justice and s. 142(3). Order u/s 148A(d) and notice u/s 148 and consequent reassessment order are therefore, quashed. Ground Nos. 1.1, 2.1 and 3.1 are allowed.

9.8. Since we have quashed the reassessment on the above grounds Ground No. 1.2 regarding issue of notice not being in accordance with e-Assessment of Income Escaping Assessment Scheme 2022 needs no separate adjudication and is therefore, left open.

9.9. Though the addition does not survive after quashing of reassessment, both sides argued on merits at length. We therefore deal with merits also without prejudice to our finding above.

10.1. Ld. AO recorded that assessee purchased 33,000 preference shares during FY 2013-14. Ld. AO’s own table records purchases on 19.04.2012 and 07.05.2012. These dates fall in FY 2012-13 and not in FY 2013-14. Ld. AO has not pointed out any document showing allotment of preference shares. In the show cause notice and reassessment order, ld. AO recorded that shares were obtained on preferential basis at nominal price. Per share cost works out to about Rs. 142.91 for 17,500 shares purchased for Rs. 25,00,910/- and about Rs. 161.63 for 15,500 shares purchased for Rs. 25,05,205/-. Ld. AO’s own monthly table of prices shows that scrip traded between Rs. 118.5 and Rs. 165.6 in April 2012 and between Rs. 111.15 and Rs. 170.25 in May 2012. The cost is thus, within market range and not nominal. We hold that these factual assumptions of ld. AO are incorrect vis-à-vis the record. Ld. AO held that the company was a paper company with virtually no business activity. Ld. AO’s own table of financial results records total income of Rs. 32,53,90,871/- and profit before taxation of Rs. 4,62,43,472/- for FY 2012-13. Audited statements extracted at para 7.3 above, show revenue from operations of Rs. 12,36,97,180/- for FY 2013-14 and Rs. 32,36,03,780/- for FY 2012-13. Revenue is from sale of flats and offices and sale of FSI and sale of shares. Other income includes rent income and profit from a partnership firm. Cost of land and constructed properties of Rs. 8,21,17,489/- is incurred in FY 2013- 14 as per Note 19. Company had secured borrowings from United Bank of India against mortgage of commercial shops. These details do not support the finding of ld. AO that there was virtually no business activity. We also note that Basic EPS for FY 2013-14 as recorded in the audited statement is at 1.09.

10.2. Ld. AO relied substantially on statement of Shri Naresh Jain recorded u/s 132(4) and on conclusions of Investigation Wing. Coordinate bench in Naresh Manakchand Jain (supra) examined the very search action. It held that statement of searched person except when voluntary cannot constitute incriminating material on standalone basis without corroboration. It held that statements of third parties also cannot constitute incriminating material unless corroborated with incriminating material seized from premises of assessee. The coordinate bench further held in para 22 as under: “22. Thus, we are of the opinion that either in the assessment order or in the order of ld CIT(A), there is no express reference of any seized material much less incriminating material found from the premises of the assessee in support of allegation of assessee being involved in business of accommodation entry of LTCG.”

10.3. Coordinate Bench examined seized material and email correspondence and found nothing incriminating. It allowed the ground for AY 2013-14 and followed the same in AYs 2014-15 to 2017-18. Thus, Coordinate Bench found no seized material to support the allegation against Shri Naresh Jain. Ld. AO in the present case has not brought on record any statement or document in which assessee is named as having paid cash or having received back cash. No cash trail is shown. No connection of assessee with Shri Naresh Jain or his associates or with the operators or exit providers is established. Assessee stated that Shri Naresh Jain and his associates are not known to him. Nothing contrary has been brought on record. The list of beneficiaries referred in the order of ld. CIT(A) is neither referred in reassessment order nor shown to have been furnished to assessee.

10.4. Assessee bought shares through registered broker on BSE and paid through banking channels. Shares were held in DMAT account and reflected in balance sheet as at 31.03.2013. Shares were sold on stock exchange through the same broker after holding period of 16 to 19 months and proceeds were received by account payee cheques. Contract notes were furnished. Rejection of such documents as “smoke and mirrors” by ld. CIT(A) is based on general inference from price behaviour and not on any evidence relating to assessee. Suspicion however strong cannot take place of proof. Ld. AO’s own findings on price rise rest on a premise of absence of business activity which stands contradicted by the audited accounts.

10.5. In view of the above, we hold that addition of Rs. 4,29,46,942/- made u/s 69A r.w.s. 115BBE cannot be sustained on merits also. The addition so made is deleted. Ground Nos. 4.1 to 4.3 are allowed.

Order is pronounced in the open court on 19 October, 2026

Sd/- Sd/- (Saktijit Dey) (Girish Agrawal) Vice President Accountant Member Dated: 19 October, 2026 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, ABHINAV ANANT Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.28 12:28:19 +05'30' (Dy./Asstt.Registrar) ITAT, Mumbai