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Facts
The assessee's assessment was reopened under Section 147 of the Income Tax Act after more than four years from the end of the assessment year, based on information about pre-arranged long-term capital gains. The original assessment was framed under Section 143(3).
Held
The Tribunal held that the reopening of the assessment was invalid because the Assessing Officer failed to record the assessee's failure to disclose all material information in the reasons for reopening. The proviso to Section 147 requires such disclosure failure for reopening beyond four years.
Key Issues
Whether reopening of assessment beyond four years is valid without recording the assessee's failure to disclose material facts, as required by the proviso to Section 147.
Sections Cited
250, 147, 148, 143(3), 2(40), 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH,KOLKATA
Appearances by: Assessee represented by : Sunil Surana, AR Department represented by : Mrinmay Basak, Sr. DR Date of concluding the hearing : 16.12.2025 Date of pronouncing the order : 19.12.2025 O R D E R The present appeal filed by the assessee arises from order dated 05.08.2025passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals), [hereafter “the Ld. CIT(A)].
The issue raised by the assessee is against the order of Ld. CIT(A) upholding the order of AO on reopening of assessment which is invalid as the same is beyond the period of 4 years from the end of relevant assessment year without satisfying the conditions of proviso to section 147 of the Act.
M/s Thirani Securities Pvt. Ltd.
The facts in brief are that the assessment has framed in this case u/s 143(3) vide order dated 25.03.2025. Thereafter the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 27.03.2019 which was duly served upon the assessee. The reopening was made after the AO received information that the assessee has generated the pre-arranged long term capital gain on the transactions of sale of shares of companies which were manipulated on the stock market. Finally, the assessment was framed u/s 143(3)/147 of the Act dated 23.12.2019 by making the addition of Rs. 43,45,909/-.
In the appellate proceedings the appeal of the assessee was dismissed by Ld. CIT(A).
After hearing the rival contention and perusing the material available on record. We find that the case of the assessee has been reopened admittedly after a period of four years from the end of the relevant assessment year. In this case, the assessment has been framed u/s 143(3) vide order dated 25.03.2015. Therefore, in order to reopen the case u/s 147 of the Act the conditions as stipulated in the proviso to section 147 of the Act have to be met. The proviso to section 147 provides that where the assessment has been framed u/s 143(3) of the Act, reopening of assessment beyond four years could only be made after the escapement of income has resulted from the failure of the assessee to truly and materially disclosed all the information during assessment proceedings or in the return of income. But while recording the reasons to believe that the AO has not mentioned anything qua the failure of the assessee. For the sake of ready reference, the reasons recorded are extracted below:
“As required, the reason recorded for re-opening of scrutiny assessment U/s.147/143(3) of the I.T. Act for the assessment year 2012-13 is as under :- "The assessee filed its return of income on 22/09/2012 in the prescribed Form, ITR-6 declaring total income of Rs.4,21,640/ which includes income from business.
M/s Thirani Securities Pvt. Ltd. Information has been received from DDIT (Inv), Unit-8(2), Mumbai vide letter no. DDIT(Inv.)/U-8(2)/Banas/2018-19 dated 06/03/2019 whereby it has been reported that investigation was conducted by the Investigation Wing, Mumbai in respect of penny scrip Banas Finance Ltd which was utilised to provide non: genuine/pre-arranged LTCG/STCL to certain beneficiaries. It is also informed that investigation were conducted by the Directorate of Investigation, Mum… The critical analysis of financials of the company viz. Banas Finance Ltd for the relevant period and sudden spike in the price of shares in spite of very poor financials/absence of any positive corporate announcement coupled with pondering over the statements of Directors of the companies whose shares were traded/operators/other parties involved in the transactions, in aggregate formed the basis for reason to believe that the entire transactions purportedly made by the assessee were pre-arranged/accommodated and the receipts in terms of sale value of Rs.11,39,500/- was the undisclosed income channelized by the assessee into its books of accounts. In this case, a return of income was filed for the year under consideration on which scrutiny assessment u/s 143(3) of the Act was done. But, in the view of new information received, requirement to initiate proceedings u/s 147 is the reason to believe which has been escaped assessment. It is pertinent to mention here that in this case, the assessee has filed return of income and assessment u/s 143(3) of the Act' as stipulated u/s 2(40) of the IT Act, 1961 was made. In view of the above, provisions of clause (c) sub-clause (i) of explanation 2 to section 147 are applicable to the facts of the case and the assessment under consideration is deemed to be a case where income chargeable to tax amounting to Rs. 11,39,500/- has escaped assessment. In this case, more than four years have elapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 has been obtained separately from the Principal Commissioner of Income tax as per provisions of section 151 of the IT Act, 1961". Accordingly your petition dated 23/04/2019 for furnishing the reason of reopening the case is hereby disposed off.”
AO has not recorded in the reasons the failure of the assessee to disclose all information truly and fully in the assessment proceedings. Therefore, the re-opening of assessment in violation of proviso to section 147 is bad in law and is quashed.
In result, appeal of the assessee is allowed.
Order pronounced on 19.12.2025