BHAVNA SHETALKUMAR PATEL,AHMEDABAD vs. THE DY.CIT, CIRCLE-3(1)(1), AHMEDABAD

At the outset, it is noted that the appeal has been filed with a delay of 170 days. The assessee submitted a sworn affidavit explaining that the order of the learned CIT(A) was passed on 23.09.2024, however, the consultant who was handling the litigation, Late Shri Chandrakant P. Raval, was suffering from multiple organ failure, was repeatedly hospitalised and thereafter passed away. Due to this circumstance, the assessee was unaware of the passing of the appellate order and came to know only when a recovery call was received from the Department, after which the assessee approached a new consultant and filed the present appeal. The delay was therefore stated to be neither negligent nor deliberate but caused due to circumstances beyond the assessee's control.

The learned Departmental Representative did not object to the condonation of delay. Considering the affidavit on record and in the interest of substantial justice, the delay of 170 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits. Facts of the Case

The assessee, an individual, filed her return of income on 07.10.2016 declaring total income of Rs.32,38,420/-. In this return, the assessee duly disclosed the purchase and sale of shares of M/s. Jackson Investments Ltd. and the resultant long-term capital gain claimed exempt under section 10(38). The assessment was processed under section 143(1).

Subsequently, on the basis of general information received from the Investigation Wing regarding alleged misuse of certain penny stock scrips, including Jackson Investments Ltd., the Assessing Officer formed a belief that income chargeable to tax had escaped assessment and issued notice under section 148 on 31.03.2021. The Assessing Officer proceeded on the assumption that the assessee had not disclosed the impugned transaction.

In response, the assessee filed her return on 22.01.2022. The Assessing Officer treated the return as non est and, after transferring the case to the ReFAC, issued multiple notices under section 142(1). The assessee filed replies only in March 2022, shortly before completion of the reassessment.

The assessee objected to the reopening on the grounds that the transaction had been fully disclosed in the original return, that the reopening was based on borrowed satisfaction and that no material relating to the assessee was furnished. These objections were rejected by the Assessing Officer.

The assessment was completed under section 144 read with section 147. On merits, the Assessing Officer treated the long-term capital gain of Rs.81,85,226 arising from sale of shares of Jackson Investments Ltd. as bogus, relying extensively on general findings of the Investigation Wing regarding penny stock accommodation entries. The Assessing Officer concluded that the assessee had routed unaccounted income through operators and made an addition of Rs.81,85,226 under section 68. 9. The assessee preferred an appeal before the CIT(A), challenging both the reopening and the addition. The CIT(A) upheld the reopening, inter alia, on the ground that the original return was processed under section 143(1) and that the Assessing Officer had received tangible information. On merits, the CIT(A) confirmed the addition relying primarily on the findings of the Investigation Wing and applying the principles of human probability.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:

The assessee also filed following additional grounds of appeal:

On the additional ground relating to the alleged non issuance of notice under section 143(2), the learned Authorised Representative contended that no such notice had been served and that nothing was traceable on the IT Portal. We have considered the submission. The assessment order reveals that in paragraph 4, while responding to the show cause notice and raising objections, the assessee herself specifically stated that the Assessing Officer had issued the notice under section 143(2). This admission, recorded contemporaneously during assessment proceedings, has not been shown to be incorrect. It is also relevant to note that the return in response to the notice under section 148 was filed almost after one year from the issuance of the notice, and the assessee's first effective reply to the statutory notices was also filed nearly after one year, and only at the fag end of the limitation period. Having remained non-compliant for such an extended period, the assessee cannot, at this late stage, be permitted to dispute a fact already admitted by her before the Assessing Officer. The original notice under section 148 was issued by the juri ictional Assessing Officer, and the case was thereafter transferred to the ReFAC for completion of assessment. No material has been placed before us to rebut the factual position emerging from the assessment order or to demonstrate that the statutory notice under section 143(2) was not issued by the juri ictional Assessing Officer prior to transfer. In these circumstances, the plea raised in the additional ground is contrary to the record, devoid of merit, and does not give rise to any triable issue. The additional ground is accordingly not admitted.

The AR assailed the validity of the reassessment proceedings initiated for the Assessment Year 2016-17 on several grounds. It was submitted that the notice under section 148 was issued on 31.03.2021 and the assessee had duly complied by filing the return of income on 22.01.2022. The assessee filed detailed objections challenging the reopening. It was pointed out that all particulars relating to long-term capital gain which was claimed exempt under section 10(38) had been fully and truly disclosed in the original return and computation (paper book page No. 46 and 49). The AR submitted that the reasons recorded merely relied on general information available on the ITBA portal and on a broad report of the Investigation Wing without any tangible material connecting the assessee with alleged accommodation entries. The reopening was therefore alleged to have been initiated mechanically and without independent application of mind. The AR emphasised that the reassessment was initiated beyond four years from the end of the relevant assessment year without demonstrating any failure on the part of the assessee to disclose fully and truly all material facts, thereby violating the proviso to section 147. The AR also pointed out that objections to the reopening were filed on 21.03.2022 but the assessment order under section 147 read with section 143(3) was passed on 30.03.2022 without disposing of the objections by a separate speaking order.

On the merits, the learned AR submitted that the assessee had furnished all primary details before the Assessing Officer, including contract notes and broker ledger reports evidencing the purchase and sale of shares through recognised stock exchange channels. It was contended that despite such comprehensive documentation, the Assessing Officer did not point out any specific defect in the evidences furnished, nor did he establish any direct linkage between the assessee's transactions and the general investigation findings relied upon. The Assessing Officer, according to the AR, proceeded solely on broad observations derived from the Investigation Wing's report without demonstrating how the said material was relatable to the assessee's case. The learned AR further submitted that the assessee's case stood on identical footing to that of her husband, Shri Shetalkumar Mavjibhai Patel, whose reassessment had been initiated on the very same facts and on the basis of identical reasons recorded by the Assessing Officer. The AR placed on record the copy of the assessment order in the husband's case (Paper Book pages 123-124), where the reassessment proceedings were completed by accepting the returned income without making any addition. It was submitted that the notice issued under section 143(2) read with section 147 in the husband's case (Paper Book page 92) contained the same reasons for reopening as in the present assessee's case. The learned AR therefore argued that when the Department itself accepted the transactions as genuine in an identical fact pattern involving the spouse of the assessee, the Assessing Officer was not justified in drawing an adverse inference against the present assessee without demonstrating any distinguishing feature or defect in the evidences furnished.

The learned Departmental Representative, on the other hand, placed reliance on the orders of the lower authorities. It was submitted that the Assessing Officer had made the addition after considering the detailed findings of the Investigation Wing and the abnormal price movement in the shares of Jackson Investments Ltd., and that the learned CIT(A) had upheld the addition after a comprehensive examination of the facts and judicial precedents. The Departmental Representative

The reasons recorded for reopening show that the Assessing Officer relied exclusively on general information emanating from the Investigation Wing regarding alleged misuse of penny stock scrips by several persons. The Assessing Officer did not rely on any independent or external material relating specifically to the assessee, nor did he undertake any enquiry to correlate the general information with the assessee's own disclosed transaction. There is no reference to any statement, report, or evidence linking the assessee to the alleged operators, entry providers or rigging syndicate. The reasons merely reproduce broad observations of the Investigation Wing relating to third parties. Such uncorrelated, generic information cannot constitute tangible material so as to confer juri iction under section 147. As consistently held by judicial authorities, material relied upon for reopening must have a live link to the assessee; generalised intelligence inputs or suspicion of widespread wrongdoing in the market cannot substitute for specific evidence relating to the person sought to be reassessed.

On an overall consideration of these facts, it is apparent that: (i) all primary facts were duly disclosed by the assessee in the original return, (ii) the Assessing Officer has neither alleged nor demonstrated any failure on the part of the assessee to disclose fully and truly all material facts, and (iii) the reasons recorded do not contain any material relatable to the assessee's own transaction. The reopening rests solely upon unverified general information without correlation to the assessee. In such circumstances, the assumption of juri iction under section 147 is invalid and the reassessment proceedings are liable to be quashed.

Even on merits, the addition under section 68 cannot survive. The assessee furnished complete primary evidences including contract notes, demat statements, broker ledgers and bank statements reflecting the sale proceeds. The Assessing Officer has not identified any defect in these evidences, nor has he carried out any independent verification regarding the assessee's specific transaction. The addition has been made entirely by importing generic findings from the Investigation Wing reports without establishing any nexus between the assessee and the alleged accommodation entry operators or dummy companies. It is well settled that broad investigation findings, however extensive, cannot replace specific incriminating material against the assessee.

A further compelling factual circumstance is that the assessee's husband, Shri Shetalkumar Mavjibhai Patel, underwent reassessment proceedings on identical facts, involving the same scrip, during the same period, and based on the same reasons recorded by the Assessing Officer. The record placed before us (Paper Book pages 92 and 123-124) shows that the reassessment in the husband's case was completed by the Department without making any addition, thereby accepting the genuniness of the very same category of transaction. When two assessees similarly placed and connected by identical factual matrices stand before the Department, consistency in tax administration requires that both be treated alike unless a distinguishing feature is established. No such distinguishing feature has been brought on record by the Assessing Officer or the learned CIT(A). In absence of any differentiating facts, the contradictory stand taken in the present case cannot be sustained. Principles of equality, consistency and parity in quasi-judicial functioning mandate that the assessee receive the same treatment as her spouse's case on identical facts.

For all the aforesaid reasons, we hold that the reassessment itself is invalid and deserves to be quashed. Even assuming it were valid, the addition made under section 68 fails on merits for want of any legally sustainable material. The addition is, therefore, deleted.

In the result, the appeal of the assessee stands allowed. This Order pronounced in Open Court on 05/12/2025 (SANJAY GARG) JUDICIAL MEMBER () Ahmedabad; Dated 05/12/2025 Tanmay, Sr. PS (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER आदेश की प्रतिलिपि अग्रेषित/