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Facts
The assessee's income tax return for AY 2011-12 was reopened under Section 147, leading to an addition of ₹3,32,62,350 under Section 68 for alleged bogus short-term capital losses. The CIT(A) deleted this addition on merit but dismissed the assessee's challenge to the validity of the assessment, which was based on an allegedly invalid approval for reassessment under Section 151.
Held
The Tribunal determined that the PCIT's approval under Section 151 for initiating reassessment proceedings was mechanical, indicated by a mere 'Yes I am satisfied' without proper application of mind or recorded satisfaction. Citing precedent, the Tribunal ruled that such a ritualistic approval rendered the Section 148 notice and the subsequent assessment invalid. Consequently, the assessment was quashed, and the Revenue's appeal became infructuous.
Key Issues
Whether the reassessment proceedings initiated under Section 147/148 were valid given the mechanical approval granted by the PCIT under Section 151 of the Income Tax Act.
Sections Cited
68, 147, 148, 143(3), 151, 151(1), 151(2), 143(2), 142(1), 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 28.08.2024 for the AY 2011-12.
The revenue has challenged the order passed by the Learned CIT (A) challenging the deletion of addition of ₹ 3,32,62,350/- by Learned CIT (A) as made by the learned AO in respect of short-term capital loss under Section 68 of the Act. The assessee has also challenged the order of learned CIT (A) under Rule 27, challenging the validity of the assessment framed under Section 143(3) / 147 of the Act, on the ground that the same is based upon the notice issued under Section 2.1. The facts in brief are that the assessee filed the return of income on 16-9-2011 declaring income of Rs. 1,49,290/-. The case of the assessee was selected for scrutiny on the basis of information in the possession of the AO under Section 147 of the Act by issuing notice on date 27-3-2018 which was complied with by the assessee by filing the return of income on 19-4-2018 declaring the same income. Thereafter, notice under Section 143(2) and 142(1) of the Act, were issued along with questionnaire and were duly replied by the assessee. The learned AO referred to the information received from ld. PCIT, Investigation, Kolkata vide letter dated 27-4-2015 that assessee had taken short- term capital loss of ₹2,95,99,250/- in the script JMD Telefilms Ltd. Thereafter, during the course of assessment proceedings, the learned AO noted that assessee has also claimed the short-term capital gain / short-term loss on transactions with Nivyah Infrastructure and Telecom Services Ltd. a penny Stock Listed on BSE with Script Code (517534) involving trade value of Rs. 36,63,100/-. Finally, the learned AO held that these are the bogus short-term capital loss entries and accordingly, added the same to the income amounting to ₹3,32,62,350 under Section 68 of the Act.
2.2. The learned CIT (A) after taking into account the submission and contentions of the assessee and documentary evidences furnished, deleted the addition on merit. However, the issue of validity of assessment raised by the assessee was dismissed and the findings are recorded by the learned CITA in para number 4 of the appellate order.
2.4. The ld. AR relied on the decision of the co-ordinate bench in the case of Sudha Surana Vs. ITO in for A.Y. 2015-16, wherein it has been held as under:-
“10. After hearing the rival contentions and perusing the materials available on record, we find that in this case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021. Perusal of the reasons recorded states that there is no application of mind by the ld. AO to the information received and even the amounts stated in the reasons recorded are different and conflicting. At one place the ld. AO stated that the assessee has entered into fictious profit in equity / derivative trading to the tune of ₹95,62,800/-, whereas in the very next line it was stated that the assessee had claimed an amount of ₹92,25,773/- as exempted Long Term Capital Gain on which STT, was paid. Finally, the ld. AO noted that the income of ₹95,62,800/- was required to brought to tax as the same has escaped assessment. Moreover, the ld. AO has not given any details of transactions entered into by the assessee such as the date of transactions, with whom the transactions were entered into and therefore, reasons recorded are devoid of any detailed information about the transactions for which the assessee has escaped income. We observe that the reasons recorded by the ld. AO is scanty, vague and ambiguous. The ld. AO has just reopened the case of the assessee based on the information received without any independent application of mind. We note that there is no mention of details of transactions, mode of payment, amount received by the assessee and also the details from whom the money was received by the 2.6. The issue raised under Rule 27, is allowed.
Since, we have quashed the reopening of assessment and the consequential order, the appeal of the Revenue becomes infructuous and is dismissed accordingly.
In the result, the issue raised under rule 27 is allowed and appeal of the Revenue is dismissed .
Order pronounced in the open court on 19.11.2025.