DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VARANASI, VARANASI vs. NIHON IMPEX PRIVATE LIMITED, GORAKHPUR

PER BENCH : These appeals have been preferred by the Revenue against the respective orders, both dated 03.03.2025, passed by the Learned Commissioner of Income Tax (Appeals), Lucknow – 3 ]Ld. CIT(A)] for Assessment Years 2014-15 and 2015-16.

2.0 Since the facts and the issues involved in the above captioned appeals are almost identical, therefore, they were taken up together for hearing and are being disposed of through this common order for the sake of convenience.

ITA Nos.94 & 95/VNS/2025 Page 2 of 28

2.1 First, we will deal with the issues involved in the case of the Revenue in ITA No.94/VNS/2025 for assessment year 2014- 15.

2.2 The assessee is a Company, namely ‘Nihon Impex Pvt. Ltd.’ incorporated at Kolkata under the Companies Act, 1956 with its Registered Office at 4th Floor, Metcalf Street, Kolkata. Later on, the said Company had changed its Registered Office from Kolkata to Gorakhpur at 502, Gokul Colony, Purdilpur, Gorakhpur, which was the Registered Office of the Company during the year under consideration. The assessee-Company had filed its Return of Income for the year under consideration under section 139(1) of the Income Tax Act, 1961 (hereinafter called 'the Act’) on 30.09.2014 declaring a total income of Rs.22,640/-. The Assessing Officer (AO) completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.91,36,250/-, vide order dated 28.12.2016.

2.3 Subsequently, on the basis of information received from the Insight Portal of the Income Tax Department that the assessee-company had received an aggregate amount of Rs.3,26,00,000/- from M/s. Mrigya Tradelink Pvt. Ltd. and M/s. AAR Commercial Pvt. Ltd. through the Bank Accounts of the above concerns during the year under consideration, but the

ITA Nos.94 & 95/VNS/2025 Page 3 of 28

source of the income had not been disclosed by the assessee- company, proceedings under section 147 of the Act were initiated and, accordingly, notice under section 148 of the Act was issued to the assessee on 30.03.2021. In response to the notice under section 148 of the Act, the assessee-company had filed its Return of Income on 22.05.2021 declaring the total income of Rs.22,640/-. During the course of re-assessment proceedings, the AO issued Notice under section 142(1) of the Act to the assessee on 20.01.2022, requiring the assessee to upload the required details and documents as sought for. In response to this notice, the assessee furnished written submission without uploading any document. Thereafter, the AO issued a Show Cause Notice on 14.03.2022, requiring the assessee to explain as to why the sum of Rs.3,26,00,000/- received from the aforementioned entities may not be considered as assessee’s concealed income. Since there was no response to the Show Cause Notice from the side of the assessee, the AO was left with no other option but to conclude the re-assessment proceedings as per the material available on record. Accordingly, the AO passed the re-assessment order under section144/147 of the Act, assessing the total income of the assessee at Rs.3,26,22,940/- after making an addition of Rs.3,26,00,000/- as unexplained

ITA Nos.94 & 95/VNS/2025 Page 4 of 28

cash credits under section 68 of the Act, vide order dated 30.03.2022.

2.4 Aggrieved with the order of the AO passed under section 147/144 of the Act, the Assessee preferred an appeal before the Ld. First Appellate Authority. Before the Ld. First Appellate Authority, the assessee, in addition to other grounds, raised a legal ground challenging the initiation of re-assessment proceedings under section 147 of the Act. While disposing of this legal ground, the Ld. First Appellate Authority held that the reopening of assessment under section 147 of the Act after expiry of four years from the relevant assessment year when the original assessment had already been completed under section 143(3) of the Act, as invalid, thereby allowing the appeal of the assessee.

2.5 Now the Revenue has approached this Tribunal challenging the order of the Ld. First Appellate Authority, by raising the following grounds of appeal:

(1) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has (1) failed to appreciate the facts that reopening of assessment u/s 147 of the I.T Act after expiry of four years from the relevant assessment is within the time allowed by the Act and escaped assessment amount is more than 1 lac rupees. (2) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that

ITA Nos.94 & 95/VNS/2025 Page 5 of 28

for reason recorded by A.O. has clearly stated that after receipt of information from the investigation wing in the case of assessee has established that the assessee has failed to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. (3) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that the case laws are written in appellate order are not applicable in this case because the reopening u/s 147 is done on the basis of information received from Investigation Wing despite the assessment was earlier competed u/s 153(3)C/143(3) of the I.T Act. (4) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that nature and source of the amount received by the assessee is not satisfactory as creditworthiness of the company's whom money and genuineness of the transactions are not satisfactory as per assessment order. (5) Any other ground that may be adduced at the time of hearing. 3.0 On identical set of facts, as narrated above for assessment year 2014-15, in assessment year 2015-16, the assessee had filed its Return of Income under section 139(1) of the Act on 23.09.2015 declaring a total income of Rs.41,590/-. The assessment was completed under sections 153(1)/143(3) of

ITA Nos.94 & 95/VNS/2025 Page 6 of 28

the Act, assessing the total income of the assessee at Rs.41,590/-, vide order dated 27.12.2018.

3.1 Subsequently, on the basis of information received from the Insight Portal of the Income Tax Department that the assessee-company had received an aggregate amount of 4,46,00,000/- from M/s D.P. Enterprises, M/s Triveni Enterprise, M/s Sarswati Enterprise, M/s Kusum Textile, M/s Shivram Trading Co., M/s Ruchi Consultants Pvt. Ltd. and M/s Sunshine Distributor, during the year under consideration, the AO initiated re-assessment proceedings under section 147 of the Act and completed the re-assessment proceedings by passing an order under section 144/147 of the Act, assessing the total income of the assessee at Rs.4,46,41,590/- after making an addition of Rs.4,46,00,000/- as unexplained cash credits under section 68 of the Act, vide order dated 30.03.2022

3.2 Aggrieved with the order of the AO passed under section 147/144 of the Act, the Assessee preferred an appeal before the Ld. First Appellate Authority. Before the Ld. First Appellate Authority, the assessee, in addition to other grounds, raised a ground challenging the initiation of re-assessment proceedings under section 147 of the Act. While disposing of this legal ground, the Ld. First Appellate Authority held that the reopening

ITA Nos.94 & 95/VNS/2025 Page 7 of 28

of assessment under section 147 of the Act after expiry of four years from the relevant assessment year when the original assessment had already been completed under section 143(3) of the Act, as invalid, resultantly allowing the appeal of the assessee.

3.3 Now the Revenue has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

(1) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the facts that reopening of assessment u/s 147 of the I.T Act after expiry of four years from the relevant assessment is within the time allowed by the Act and escaped assessment amount is more than 1 lac rupees. (2) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that for reason recorded by A.O. has clearly stated that after receipt of information from the investigation wing in the case of assessee has established that the assessee has failed to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. (3) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that the case laws are written in appellate order are not applicable in this case because the reopening u/s 147 is done on the basis of information received from Investigation Wing despite the

ITA Nos.94 & 95/VNS/2025 Page 8 of 28

assessment was earlier competed u/s 153(3)C/143(3) of the I.T. Act. (4) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that nature and source of the amount received by the assessee is not satisfactory as creditworthiness of the company's whom money and genuineness of the transactions are not satisfactory as per assessment order. (5) Any other ground that may be adduced at the time of hearing. 4.0 During the course of hearing the Ld. CIT (DR), Shri Amalendu Nath Mishra emphasized that the order passed by the Ld. First Appellate Authority is wholly erroneous, as there existed reasons which were formed on the basis of information received through the Insight Portal and verified by the Investigation Wing that the assessee-company has brought back its un-accounted fund amounting to Rs 3,26,00,000/- in its books of accounts. Such information was enough to invoke the provision relating to reassessment proceedings and the sufficiency of the reasons was not required to be gone into at the time of initiation of such re- assessment proceedings. He submitted that the Assessing Officer was right in invoking the re-assessment proceedings after four years, as there was failure on the part of the assessee to disclose full and true disclosure in its return and, thus, income to the tune of Rs 3.26 crores had escaped assessment. It was submitted

ITA Nos.94 & 95/VNS/2025 Page 9 of 28

that the proviso to section 147 would not apply in the present case, as the Assessing Officer had not examined this issue at the time of regular assessment. He submitted that the order passed by Ld. CIT (A) deserves to be set-aside and the order of the Assessing Officer be restored. The Ld. CIT (DR) placed reliance on the judgment of Raymond Woolen Mills, Ltd. vs. ITO - 236 ITR 34 and CIT vs. Rajesh Jhavari Stock Brokers (P) Ltd. - 291 ITR and further argued that the judgments relied upon by the Ld. CIT(A), while deciding the appeal of the assessee, are distinguishable on facts and are not applicable in the present case. He submitted that his arguments would apply mutatis mutandis to assessment year 2015-16 also. 6.0 Per Contra, the ld. AR of the assessee, Sri Ashish Bansal, Advocate drew our attention to the various pages of the paper book. He has heavily relied upon pages 1, 2, 4 to 6, 29 to 33, 49 to 55, 59 to 66, submissions made during the first appellate proceedings (which are from pages 78 to 100 of the paper book and reproduced in the first appellate order at pages 26 to 31) and observation made by the Ld. First Appellate Authority. The Ld. AR drew our attention to the notices issued during the course of regular assessment proceedings, responses made by the assessee as also the observations recorded in the regular assessment order passed under section 143(3) of the Act. Further, the Ld. AR

ITA Nos.94 & 95/VNS/2025 Page 10 of 28

emphasized that as the complete scrutiny was carried out by the Assessing Officer while conducting regular assessment proceedings, each and every aspect had been examined and verified by him and that it was only after going through the facts in entirety that the assessment order had been passed. He argued that in view of these facts, initiation of re-assessment proceedings after four years from the end of the relevant assessment year, without there being any failure on the part of the assessee to disclose truly and fully all material facts as was required for assessment for the year under consideration, was in complete violation of the first proviso to section 147 of the Act. The Ld. AR further stated that the reasons recorded by the Assessing Officer are non-existent, as there is no such transaction of Rs.3.26 crores as alleged to have been received from Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd. during the year under consideration and that no such entry is appearing in its audited books of account or bank statement, which were accepted - both during the course of regular assessment proceedings as also the re-assessment proceedings and, therefore, provisions of section 68 of the Act was not applicable at all. He submitted that in view of these facts, the entire re-assessment proceedings were void-ab-initio. Further, the fact of non-existence of the entry(ies) of Rs.3.26 crores from

ITA Nos.94 & 95/VNS/2025 Page 11 of 28

alleged Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd. in its books of account has also not been disputed by the Assessing Officer through the re-assessment proceedings. He submitted that, accordingly, the relief allowed by the Ld. CIT(A) in the impugned order is correct - both on facts as well as in law and the same should be upheld and the appeal filed by the revenue deserved to be dismissed. He also submitted that the facts in assessment year 2015-16 were identical and that his arguments would also apply mutatis mutandis in assessment year 2015-16 as well.

7.0 We have heard the rival submissions and have also perused the record before us. To recapitulate the entire factual matrix, it is seen that the assessee had filed its return for the assessment year 2014-15 on 30.09.2014. The said return was selected for scrutiny and notice under section 143(2) was issued to the assessee. Thereafter, various notices under section 142(1) along with the questionnaire were issued requiring the assessee to comply with the same. In response to the said notices, the assessee duly filed the required information. After considering the written submissions, documents and audited statement of account, the Assessing Officer completed the assessment proceedings vide assessment order dated 28.12.2016 passed

ITA Nos.94 & 95/VNS/2025 Page 12 of 28

under section 143(3) of the Act. In the said assessment order addition of Rs 91,13,611/- was made on account of disallowance of loss due to currency fluctuation claimed by the assessee. The said assessment order was challenged by the assessee before the Ld. First Appellate Authority in appeal. The appeal was decided by the Ld. CIT (A) vide order dated 23.01.2020 deleting the addition made by the Assessing Officer. No further appeal was preferred by the Revenue.

7.1 Thereafter, notice under section 148 of the Act, vide dated 30.03.2021 was issued by the Assessing Officer and re- assessment proceedings were invoked against the assessee. The said notice was issued after 4 years from the end of the assessment year under consideration. The Reasons recorded for invoking reassessment proceedings reads as under: “Brief details of assessee The assessee company has filed its return of income for the A.Y. 2014-15 showing total income of Rs.22,639 /- on 30.09.2014. ITR was processed on 19.04.2015. Subsequently the case was selected for scrutiny under CASS and the assessment was made 28.12.2016 on assessed income of Rs.91,36,250/-. Brief details of Information collected / received by the AO In this case, information has been received through the Insight Portal that the assessee company has brought back its un-accounted fund amounting to Rs 3,26,00,000/- in its books of accounts with the help of multi-layered transaction rotated through some shell companies. Analysis of information collected / received Detailed perusal of information revealed that an entry provider Sri Dipankar Paik (PAN-BNGPP4666P) has several proprietorship concerns like M/s D. P. Enterprise, Shakti Textile, Unique

ITA Nos.94 & 95/VNS/2025 Page 13 of 28

Enterprise, Vishnu Enterprise and Century Enterprises in which huge transaction seen in their bank accounts. Several bank accounts are interrelated. The entity related to textile manufacturing. The transactions are mainly through cash credit/Transfer. High value cash credited i.e. below threshold limit of Rs. 10,00,000/- in accounts indicating the intention of avoiding regulatory reporting and immediately transferred to different entities, Almost the entire amount so deposited is transferred to the other accounts leaving small balance in the root account. From ITBA it is found that Sri Dipankar Paik has filed only ROI for the AY 2013-14 and 2014-15. His return of Income was perused and following data were emerged from his return of income. Assessment Total Total Tax paid year turnover/Credit income in P LAC 2013-14 0 186450 0 2014-15 490860 199180 0 From the above table it has gathered that Sri Dipankar Paik has no credit worthiness. Further analysis of paper companies managed by him has been made through financial data available on the MCA and other online portals. It is found that credit worthiness of all these companies is poor and these are used for layering and rotation of funds only. These entities have allowed their bank accounts for layering and rotation of funds. The modus operandi is that initially cash were deposited in these bank accounts and then layered and finally transferred to several beneficiaries. The assessee has introduced his unaccounted money amounting to Rs 3,26,00,000/- during the AY 2014-15. These funds were received by the assessee in its bank account through bogus shell companies Mrigya Tradelink Pvt ltd. And AAR Commercial Pvt Ltd after so many layers. Enquiries made by the AO as sequel to information collected / received The Information available on Insight, ITBA, E-Filing portals, financial Data etc available with MCA and departmental database of shell companies and entry providers, statements of unscrupulous brokers, exit providers, share transactions alongwith various other online financial portals, orders of various authorities like SEBI and courts etc regarding companies involved in whole scam have been gathered and examined deeply.

ITA Nos.94 & 95/VNS/2025 Page 14 of 28

Finding of the AO Based on analysis made by undersigned it is evident that the transactions done by the assessee Rs 3,26,00,000/- during the AY 2014-15 with the companies managed by Dipankar Pai were not genuine transactions and pre-arranged accommodation entries were obtained by him with the help of syndicate of operators by way of the loopholes of the system in A.Y. 2014-15. In this way, the unaccounted money of the assessee amounting to Rs. 3,26,00,000/- was routed to his books of account. Basis of forming reason to believe and Details of escapement of income The undersigned has carefully applied mind as discussed above. This paves a way to form a reasonable belief regarding escapement of income. In terms of provisions of sec. 147 of the Income Tax Act, there is a clear nexus between the material available on record and escapement of income amounting to Rs. 3,26,00,000/- in A.Y. 2014-15 which gives the undersigned the reason to believe for initiating the proceedings u/s 147 of the Income Tax Act, 1961. Applicability of provisions of section 147/151 to the facts of the case In this case, a return of income was filed for the assessment year under consideration i.e. A.Y. 2014- 15. Though the assessment in the relevant year was done u/s 143(3) of the I. T. Act, 1961 but after receipt of information from the Investigation Wing as detailed above, the ITR filed by the assessee has gone through alongwith the previous assessment record. It is evident that the assessee has failed to disclose fully and truly all material facts necessary for its assessment for that A.Y. 2014-15. Moreover, necessary facts which have been discovered and conveyed by the Investigation Wing at this stage after conducting enquiries in respect of assessee could not be established by the assessing officer apparently on the basis of information supplied by the assessee company during the course of scrutiny proceedings by due diligence. Accordingly, the only requirement to initiate proceeding u/s 147 of the Income Tax Act, 1961 is the reason to believe that an income of more than Rs 1,00,000/- chargeable to tax has escaped assessment which has been recorded above in detail paragraphs.”

ITA Nos.94 & 95/VNS/2025 Page 15 of 28

7.2 The above stated reasons were provided to the assessee, after it filed its return on 22.05.2021, in compliance to the notice issued under section 148 of the Act. The assessee objected to the reasons recorded vide letter dated 18.08.2021 stating that there existed no tangible material on the basis of which re-assessment proceedings were being invoked against it. It was further objected to on the ground that no information/ back ground material had been supplied to it. It was the assessee’s objection that the proceedings had been invoked merely on the basis of suspicion and, therefore, the re- assessment proceedings should be dropped against it.

7.3 The objections made by the assessee were disposed of by the Assessing Officer, vide letter dated 21.03.2022 stating that sufficiency of reasons was not a material fact for annulling the re-assessment proceedings. The AO stated that the material was received from the Investigation Wing of the Department which, prima facie, was sufficient to permit the A.O. to form an opinion that the assessee-company had entered into transactions with an attempt to nullifying the profit for the sake of evading the tax. The AO noted that the sufficiency of reasons cannot be challenged. In this context, reliance was placed on the judgments of the Hon’ble Supreme Court in the cases of Raymond Woolen

ITA Nos.94 & 95/VNS/2025 Page 16 of 28

Mills, Ltd. vs. ITO - 236 ITR 34 and CIT vs. Rajesh Jhavari Stock Brokers (P) Ltd. - 291 ITR 500. The AO noted that at the stage when reasons are validly recorded for reopening the assessment, the Assessing Officer was not required to build a fool proof case for making addition to the assessee's income and that all that was required to be done at that stage was to form a prima facie opinion or belief that income had escaped assessment. 7.4 In response to the above said disposal of reasons by the AO, the assessee filed a rebuttal, vide letter dated 24.03.2022, once again objecting that there existed no material on the basis of which the re-assessment proceedings could have been invoked against the assessee and that, moreover, the alleged information which formed the basis for re-assessment proceedings against it was non-existent, as it had not received any sums by way of loans or otherwise to the tune of Rs.3.26 Crores as had been stated in the reasons recorded. It was also stated that, however, the assessee had received Rs.20,00,000/- from M/s AAR Commercial Co. Ltd. (not AAR Commercial Pvt. Ltd.) and that the said amount had been received by it as a sale consideration for sale of 4000 numbers of equity shares @ Rs. 500/- per share. It had further been stated that as far as M/s Mrigya Tradelink Pvt. Ltd. was concerned, no receipt of any kind, had been received by the assessee during the year under consideration.

ITA Nos.94 & 95/VNS/2025 Page 17 of 28

7.5 However, without rebutting the averment made by the assessee that there was no transaction of Rs.3.26 crores (as stated in the reasons recorded) through Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd during the year under consideration, the Assessing Officer proceeded to issue show cause notice as to why addition of Rs.3,26,00,000/- should not be made, as the source of income had not been disclosed. 7.6 In response to the said notice, reply was filed by the assessee on 25.03.2022 reiterating that the re-assessment proceedings were not based on any tangible material and that there existed no transaction of Rs.3.26 crores as alleged to have been made by the assessee with M/s Mrigya Tradelink Pvt. Ltd. and that the transaction of Rs. 20,00,000/- was made with M/s AAR Commercial Co. Ltd. and not AAR Commercial Pvt. Ltd. as stated in the reasons recorded and that the same related to the amount received by it as sale consideration for sale of 4000 numbers of equity shares @ Rs. 500/- per share which were duly recorded in regular course in the audited books of account.

7.7 However, re-assessment order dated 30.03.2022 was passed under section 147/144B of the Act by the Assessing Officer adding Rs. 3,26,00,000/- under section 68 of the Act, to the returned income, alleging that no compliance in respect to

ITA Nos.94 & 95/VNS/2025 Page 18 of 28

the show cause notice had been filed by the assessee till the date of passing of the assessment order. 7.8 The assessee challenged the said reassessment order before the Ld. CIT (A), raising various grounds of appeal both on legal as well as factual disputes. During the course of first appellate proceedings, the assessee filed its written submissions stating that the entire reassessment proceedings against it were deficient, as there existed no tangible material on the basis of which re-assessment proceedings could have been invoked against it. Further, the alleged information was not related to it, as there existed no transaction of Rs.3,26,00,000/- appearing in its audited books of account which was alleged to have been received from Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd. and had been routed through its bank account. It was submitted before the Ld. First Appellate Authority that the Assessing Officer had failed to rebut this fact in the assessment order. Further, the assessee also stated before the Ld. First Appellate Authority that complete examination of the audited accounts was carried out by the Assessing Officer during the course of regular assessment proceedings and, thereafter, the assessment order was passed. It was also submitted before the Ld. First Appellate Authority that since the re-assessment proceedings for the year under consideration were invoked after

ITA Nos.94 & 95/VNS/2025 Page 19 of 28

four years from the end of the assessment year, 1st proviso to section 147 was applicable in its case, as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for making the assessment during the year under consideration. It was submitted before the Ld. First Appellate Authority that, in fact, the issue relating to loans and advances, share transaction etc. were duly examined by the Assessing Officer during the course of regular assessment proceedings, and that its audited books of account had not been disputed, hence, it also amounted to change of opinion.

7.9 The Ld. CIT (A), after considering the submission made by the assessee and evidences placed on record through written submission, passed the impugned appellate order dated 03.03.2025 allowing the appeal in favour of the assessee by annulling the re-assessment proceedings as having been invoked vide notice dated 30.03.2021 issued under section 148 of the Act and consequent reassessment order dated 30.03.2022, after observing as under:

“6.15 I have carefully examined the assessment order and facts of the case. Nowhere any adverse finding has been found recorded which may prove that there was any failure on the part of the appellant to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. Therefore, reopening of assessment u/s 147 of the Act after expiry of four years from the relevant

ITA Nos.94 & 95/VNS/2025 Page 20 of 28

assessment year when original assessment had already been completed u/s 143(3)of the Act, is invalid as per the proviso of section 147 of the Act. Thus, this ground of appeal is hereby allowed. 7. Since reopening of the assessment u/s 147 of the Act has already been held to be invalid, thus, remaining grounds of appeal are not being adjudicated as it would be only academic.”

8.0 Now, in the Departmental Appeal before us, the Ld. CIT (DR) has argued vehemently that the reassessment proceedings had been validly initiated. It has been submitted that there existed reasons which were formed on the basis of information received through the insight portal and verified by the Investigation Wing that the assessee-company had brought back its un-accounted fund amounting to Rs 3,26,00,000/- in its books of accounts. It has been argued that such information was enough to invoke the provision relating to re-assessment proceedings and that the sufficiency of the reasons was not required to be gone into at the time of initiation of such re- assessment proceedings. It has been submitted that the Assessing Officer was right in invoking the assessment proceedings after four years, as there was failure on the part of the assessee to disclose full and true disclosure in its return and, thus, income to the tune of Rs.3.26 crores had escaped assessment. It was also submitted that the proviso to section 147

ITA Nos.94 & 95/VNS/2025 Page 21 of 28

would not apply in the present case, as the Assessing Officer had not examined this issue at the time of regular assessment. 8.1 However, it is undisputed that the initially the assessment had already been completed u/s 143(3)(ii) of the Act and the proceedings at that stage have an important bearing while deciding as to whether the re-assessment proceedings were validly initiated. On perusal of the notice dated 26.09.2016 (pages 1 and 2 of Paper Book) issued during the course of regular assessment proceedings and as appearing in the paper book, we note that the assessee was required to furnish complete details relating to purchase/sale of shares during the year, bank statements of all the bank accounts, sources of loans and advances, etc. during the year. Further, the assessee was required to produce complete books of account and other records. In another notice dated 09.11.2016 (pages 4 to 6 of the Paper Book) comprehensive query being query no. 3 and 8, were raised regarding party-wise transactions with reference to trading in shares and money received from various parties. In response to the said queries, the assessee had duly responded vide letter appearing at pages 10 to 28 of the paper book duly supported by bank statements, sale bills and confirmations of accounts. As far as entry of Rs.20,00,000/- in the name of M/s AAR Commercial Company Ltd. is concerned, the same was also verified by the

ITA Nos.94 & 95/VNS/2025 Page 22 of 28

Assessing Officer and finally assessment order under section 143(3) was passed on 28.12.2016 (pages 29 to 33 of the Paper Book) after categorically recording his as under: “4. On perusal of Directors report, it is noticed that as per Point No. 13, the company is not a chit fund or a nidhi/mutual benefit fund/society. As per Point No. 14 company is trading in shares, Mutual Funds & other investments. On perusal of balance sheet, it has been noticed that there is investment of Rs. 36,69,85,750/- in unquoted shares, Rs. 40,38,200/- has been shown as stock in trade, Rs. 2,02,45,000/- has been shown as advances and Rs. 12,49,47,539/- has been disclosed as loans. It is also notice that there is no trading activity.”

8.2 Thus, apparently, there is not a whisper of any other loan or advance received which was flagged by the Assessing Officer as being unverifiable. 8.3 Further, it is seen that when the re-assessment proceedings were initiated by recording the reason that the assessee had received Rs.3.26 crores odd from Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd. and had been routed through its bank account, the assessee specifically denied the same on being provided with a copy of the reasons. However, the AO, without leading any evidence to the contrary to rebut the objection of the assessee, again proposed the aforesaid impugned addition which was again specifically objected to by the assessee, as there being no such entries in the books of the assessee. This again was not accepted by the AO and he proceeded to make the impugned

ITA Nos.94 & 95/VNS/2025 Page 23 of 28

addition. On such a factual matrix, it becomes very apparent that the AO had proceeded to initiate the assessment proceedings on entirely wrong set of reasons and without conducting a proper enquiry as to the reliability of the information coming into his possession from the Insight Portal of the Department. It is also very much apparent that the AO simply brushed aside the objections without giving them a thoughtful consideration and without verifying the correctness or otherwise of the objections so raised by the assessee to the reasons recorded. Therefore, it is our considered view that the re-assessment proceedings had been initiated against the assessee on the basis of wrong set of reasons which were not in existence. 8.4 Further, in the present case, after completing the original assessment proceedings u/s 143(3) of the Act, re-assessment proceedings having been initiated on the basis of non-existence of entries, as recorded in the reasons recorded by the Assessing Officer, and that too after four years from the end of the relevant assessment year, first proviso to section 147 has to be seen. The said section reads as under: “Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in

ITA Nos.94 & 95/VNS/2025 Page 24 of 28

the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153referred to as the relevant assessment year) : 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:” 8.5 It is evident that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. Moreover, as the entries of Rs.3.26 crores, as alleged in the reasons recorded, having been received in the bank account of the assessee from Mrigya Tradelink Pvt. Ltd. and AAR Commercial Pvt. Ltd., are not found in the books of account of the assessee, provision of section 68 which has been invoked by the Assessing Officer would not apply. We note that the issue relating to reopening of case after four years, where there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, is fully covered by the judgment of the Hon’ble Allahabad High Court in the case of Foramer Vs. CIT reported 247 ITR 436 which has been affirmed

ITA Nos.94 & 95/VNS/2025 Page 25 of 28

by the Hon’ble Apex Court in CIT Vs. Foramer France reported in 264 ITR 566. Further, the Hon’ble Allahabad High Court in the case of Smt. Raj Rani Gulati Vs. UOI reported in 329 ITR 370 has held as under: “9. We are of the view that the proceeding is patently barred by limitation under proviso to section 147 of the Act, notice under section 148 of the Act can be issued beyond the period of four years only in a situation where there is failure on the part of the assessee to disclose all material facts necessary for the assessment. Unless such case is made out, no notice beyond the period of four years can be issued. We have gone through the findings recorded by the assessing authority in the assessment order. The findings recorded by the assessing authority in the assessment order reveals that the assessee has furnished complete details relating to the sale of 16,000 equity shares of M/s. Viraj Credit Capital Limited through M/s J.R.D. Stock Brokers (P.) Limited, Daryaganj, New Delhi and on the basis of the material furnished, the assessing authority has also made necessary enquiry and, therefore, we are of the view that there was no failure on the part of the assessee to disclose the fully and truly material in respect of 16,000 equity shares of M/s. Viraj Credit Capital Limited through M/s. J.R.D. Stock Brokers (P.) Limited, Daryaganj, New Delhi and, therefore, the limitation available for initiation of proceeding was only four years. In the present case, the notice issued on 11-5-2006 under section 148 of the Act, was beyond four years and, thus, barred by limitation. 10. In the result, the writ petition is allowed. The notice dated 11-5-2006 under section 148 of the Act and the consequential proceedings are hereby quashed.”

8.6 Therefore, in view of the settled legal position and on the facts of the appeal before us, we are of the considered view that the Ld. CIT (A) has rightly annulled the re-assessment proceedings initiated by the Assessing officer under section 147

ITA Nos.94 & 95/VNS/2025 Page 26 of 28

of the Act with the issuance of notice under section 148 after four years from the end of the relevant assessment year without there being any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. We therefore, dismiss the grounds raised by the department in ITA No. 94/VNS/2025 for assessment year 2014-15. 8.7 In the result, the appeal of the assessee in ITA No 94/VNS/2025 is dismissed. 9.0 As regards other appeal being ITA No. 95/VNS/2025 relating to the A.Y. 2015-16, the facts of the case are ipso-facto same, only the amount and parties being different. The reasons recorded by the Assessing Officer before issuing notice under section 148 of the Act after four years from the end of the relevant assessment year are also identical and the factual matrix is also identical to facts in assessment year 2014-15. The assessment for this year had been completed under section143(3) of the Act which was selected for scrutiny for the reason that there was low income in comparison to high loans/ advances/ investment in shares, sale of property reported in Form 26QB, low income in comparison to very high investment, large interest expenses relatable to exempt income, purchase of property reported in Form 26QB, mismatch in sales turnover reported in Audit report and ITR and after due verification in its entirety with

ITA Nos.94 & 95/VNS/2025 Page 27 of 28

the audited books of account and other records, assessment order had been passed, vide assessment order dated 17.12.2017 and the returned income disclosed by the assessee stood accepted. 9.1 Thereafter, the case of the assessee was again selected for assessment under section 153C/ 143(3) of the Act in consequence to paper found in the name of the assessee during the search and seizure action in the case of Shalimar Corporation Ltd. After due verification of the submission and audited statement of accounts and other records, assessment order dated 27.12.2018 was passed by the Assessing Officer under section 153C/143(3) of the Act, after taking prior approval from the JCIT, Range – 2, Gorakhpur and as per this order, the returned income was accepted by the Assessing Officer. 9.2 In this year also,on initiation of re-assessment proceedings, the assessee stated that it had not entered into any transactions of sums aggregating to Rs.4.26 Crores from alleged M/s D.P. Enterprises, M/s Triveni Enterprise, M/s Saraswati Enterprise, M/s Kusum Textile, M/s Shivram Trading Co., M/s Richi Consultants P. Ltd., and M/s Sunshine Distributors as alleged in the reasons recorded and that the same was fully borne out from its books of accounts and other records. This fact again was not rebutted by the Assessing Officer either in the assessment order.

ITA Nos.94 & 95/VNS/2025 Page 28 of 28

Further, the first proviso to section 147 comes to be attracted in the present case too. Due cognizance of this fact has been taken by the Ld. First Appellate Authority while passing the impugned appellate order for the year under consideration. 9.3 As the controversy involved in the present appeal is identical - both on facts as well as in law, therefore, in view of the our findings as stated in ITA No. 94/VNS/2025 relating to A.Y. 2014-15, the present appeal filed by the Revenue is also dismissed. 9.4 In the result, the appeal of the Department in ITA No. 95/VNS/2025 for AY 2015-16 is also dismissed. 10.00 In the final result, both the appeals of the Department are dismissed. Order pronounced in the open Court on 04/11/2026.

Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:04/11/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order JOHN Digitally signed by JOHN JOSEPH JOSEPH Date: 2026.11.12 10:42:30 +05'30'