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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri T.R. Senthil Kumar & Shri Makarand Vasant Mahadeokar
Hiral Tapankumar Income Tax Officer Chudgar Ward-1(3)(1), 201/A, Premdarshan, Vs Vadodara Behind Jay Ambe School, Samasavli Raod, Vemali, Vadodara-390008, Gujarat PAN: ANCPC4000H (Appellant) (Respondent) Assessee Represented: Shri Deepak Shah, A.R. Revenue Represented: Shri Abhijit, Sr.D.R. Date of hearing : 18-06-2025 Date of pronouncement : 12-08-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
These two appeals are filed by the Assessee as against the exparte appellate orders dated 25.11.2024 and 04-12-2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment orders passed under section 147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2017-18 and 2018-19 respectively. Since the common issue on sale of stock which is said & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 2 Hiral Tapankumar Chudgar vs. ITO to be penny stock is involved in both the appeals, the same are disposed of by this common order.
Brief facts of the case is that the assessee is an individual filed his original Return of Income for the Asst. Year 2017-18 on 30-03- 2018 declaring income of Rs.67,22,750/-. Information received from the Investigation Wing that a search operation was carried on the Kushal Group of Companies, Ahmedabad which was providing bogus accommodation entries of Long Term Capital Gain/Loss and Short Term Capital Gain/Loss. The assessee was one among the beneficiary who was obtained Long Term Capital Gain of Rs. 29,55,558/- and claimed exemption u/s 10(38) of the Act. Thus the income chargeable to tax of Rs.29,55,558/- for the Asst. Year 2017- 18 has escaped assessment within the meaning of Section 147 of the Act and show cause notice u/s 148A(b) of the Act was issued on 23-05-2022. The assessee filed a detailed reply that the reopening notice is without jurisdiction since the escaped income claimed is less than Rs.50,00,000/- and there is no question of escaped income and requested to drop the reassessment proceedings.
2.1. The above objection was considered by the Assessing Officer and found not acceptable and proceeded with reassessment by making addition of Rs.29,55,558/- and denied the claim of deduction made u/s.10(38) of the Act, added as unexplained money u/s 69A r.w.s. 115BBE of the Act and also made addition of Rs.4,26,069/- as unexplained investment made in Kushal shares & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 3 Hiral Tapankumar Chudgar vs. ITO out of his own funds. The A.O. also made addition cash deposit of Rs.2,00,000/- during demonetization period as unexplained money u/s.69 r.w.s. 115BBE of the Act. Thus, the Assessing Officer assessed the income at Rs.1,03,04,377/- and demanded tax thereon.
3. Aggrieved against the reassessment order assessee filed appeal before Ld. CIT(A) who has given seven opportunities of hearing between 26-07-2024 to 08-11-2024. As there was no response from the assessee, Ld. CIT(A) passed exparte appellate order confirming the additions made by the assessing officer.
Aggrieved against the same, the assessee in appeal before us raising the following Grounds of Appeal:
1. On the facts and circumstances of the case, as well as the relevant provisions of law, the learned A.O. has erred in reopening the assessment under Section 147 of the Income Tax Act, 1961, by issuing notice under Section 148 of the Act. Further CIT(Appeals) has erred in dismissing the appeal. The reopening of the assessment is unjustified and contrary to the legal provisions.
2. On the facts and circumstances of the case, as well as the applicable law, the A.O. has erred in denying the exemption under Section 10(38) and in making an addition of Rs.29,55,558/-as long-term capital gain under Section 69A of the Income Tax Act, 1961, in relation to the security transaction in Kushal Ltd. The A.O. erroneously treated this transaction as an accommodation entry. Further CIT(Appeals) has erred in dismissing the appeal. The addition of Rs 29,55,558/- is unjustified both in law and in fact, and it is respectfully requested that the same be deleted.
On the facts and circumstances of the case, as well as the legal provisions, the A.O. has wrongly made an addition by treating the purchase transaction of Rs. 4,26,069/- as an unexplained investment. The A.O. failed to take into account the bank statement and the BSE ledger maintained by the broker, which clearly explain the source of the & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 4 Hiral Tapankumar Chudgar vs. ITO investment. Further CIT(Appeals) has erred in dismissing the appeal. The addition of Rs.4,26,069/- is erroneous in law and fact, and it is requested that this addition be deleted.
4. The A.O. has erred in applying Section 1158BBE to the total addition of Rs.33,81,627/-made on account of long-term capital gain of Rs.29,55,558/- from the security transaction in Kushal Ltd. and Rs 4,26,069/- for the purchase transaction treated as unexplained investment. The facts and evidence clearly demonstrate that there is no unexplained money or investment under Sections 69A or 69 of the Income Tax Act, 1961, and no income has escaped assessment. Further CIT(Appeals) has erred in dismissing the appeal. Therefore, Section 115BBE cannot be invoked, and its application in this case is both legally and factually incorrect. The application of Section 115BBE should be deleted.
5. The Ld. A.O. has erred in law and in facts in initiating the penalty u/s 271AAC of the I.T. Act on total addition made for Rs.33,81,627/-.
Add, alter, amend or withdraw: The appellant may be allowed to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.
Ld. Counsel Shri Deepak Shah appearing for the assessee submitted before us a Paper Book and case laws in support of his arguments. Ld. Counsel submitted that the reopening of assessment for the Asst. Year 2017-18 is done after three years. As per Explanation 2 to Clause (b) of Section 148A of the Act, ‘asset’ shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account which exceeds in the form of asset valued at Rs. 50,00,000/- or more or has escaped assessment. Whereas, as per the notice issued u/s.148 of the Act the income escaped assessment is Rs.29,55,558/- which is below Rs.50 lakhs, therefore the assessing officer is not correct in invoking the provisions of section 148A of the Act. Thus Ld Counsel requested to & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 5 Hiral Tapankumar Chudgar vs. ITO quash the reassessment order as without jurisdiction and relied upon the decision of the Mumbai Bench Tribunal in the case of Pankaj Chandrakant Pimple Vs. International Tax reported in [2025] 174 taxmann.com 169 (Mumbai-Trib.) and Delhi High Court judgement in the case of Mohd Athar Anjum Vs. ACIT reported in [2025] 174 taxmann.com 337 (Del).
6. Per contra Ld Senior DR Shri Abhijit appearing for the Revenue supported the orders passed by the lower authorities and requested to sustain the same and dismiss the appeals filed by the assessee.
We have given our thoughtful consideration and perused the materials available on record including the Paper books and case laws relied by the assessee. It is seen from record that the assessee in his reply letter dated 08-06-2022 to the notice issued u/s. 148A[b] of the Act clearly objected that the escaped assessment is Rs.29,55,558/= only which is less than the prescribed limit of Rs.50 lakhs, thus the notice u/s.148A cannot be issued beyond three years and the assumption of jurisdiction itself is bad in law and therefore requested to drop the reassessment proceedings. The AO considered the above reply in his order dated 30-07-2022 while disposing the objection u/s.148A[d] of the Act by holding that the assessee has obtained accommodation entries in the form of LTCG to the extent of Rs.29,55,558/ as to evade tax thereon and the amount is required to brought under taxation. It is thereafter the AO passed the reassessment order on 26-05-2023 and assessed the total income at Rs.1,03,04,377/- and demanded tax thereon.
& 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 6 Hiral Tapankumar Chudgar vs. ITO 7.1. It is undisputed fact that the reassessment is initiated beyond three years from the end of Asst. year 2017-18 and the value of the ‘asset’ in this case is Rs.29,55,558/ which has escaped assessment, which is much below Rs.50 lakhs as per Explanation 2 to Clause (b) of Section 148A of the Act. In these circumstances, the validity of reopening is considered to be invalid by various decisions of this Tribunal and Hon’ble High Courts.
7.2. The Co-ordinate Bench decision of Mumbai Bench in the case of Pankaj Chandrakant Pimple Vs. International Tax reported in [2025] 174 taxmann.com 169 (Mumbai-Trib.) wherein it is held as follows:
“… 7. On perusal of the above contentions raised by the assessee, it is evident that the ld. AO has issued the impugned notice u/s. 148 of the Act, dated 19.07.2022, after 3 years from the relevant assessment year which is A.Y. 2017-18 for which the 3 year period ends on 31.03.2021. Section 149(1) of the Act mandates that notice u/s. 148 cannot be issued after lapse of 3 years from the end of the assessment year, unless the ld. AO is in possession of books of accounts or other documents or evidence which reveal that the income which has escaped assessment is Rs. 50,00,000/- or more for that year. The ld. AO has passed order u/s. 148A(d) of the Act dated 19.07.2022, and notice u/s. 148 of the Act, was issued on 19.07.2022, where the income alleged to have escaped assessment is determined as Rs. 35,13,283/- which is much below the limit prescribed by the provisions of the Act. …………………………… 10. From the above observation, the issue in hand has extensively been dealt with by Hon'ble High Court of Delhi which has held that only in case of serious tax evasions were the income which has escaped assessment is Rs. 50,00,000/- and above could be reassessed after the lapse of 3 years and upto 10 years from the relevant assessment year. The assessee's case would squarely be covered by the above said proposition which has also been reiterated by the Hon'ble jurisdictional High Court of & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 7 Hiral Tapankumar Chudgar vs. ITO
Bombay in the case of Naresh Balchandrarao Shinde (supra). By respectfully following the above decisions, we hereby quash the order passed u/s. 148A(d) of the Act and the notice u/s. 148 of the Act and hence, allow ground no. 1 raised by the assessee. As we have quashed the reassessment proceedings, the other grounds raised by the assessee requires no separate adjudication and are rendered academic in nature. “
7.3. The High Court of Delhi in the case of Mohd Athar Anjum Vs. ACIT reported in [2025] 174 taxmann.com 337 (Delh) wherein it is held as follows:
“ … 17. Sub-section (1A) of Section 149 of the Act contains a non obstante provision, which mandates issuance of notice, for an assessment year falling within the period as referred to in clause (b) of Section 149(1) of the Act, notwithstanding that the income escaping assessment in the assessment year does not exceed the value as mentioned in that clause provided the following conditions are cumulatively satisfied: (a) that the income chargeable to tax, which has escaped assessment in more that one previous years amounts to or is likely to amount to fifty lakh rupees or more; and (b) that the said income, which has escaped assessment is represented by (i) an asset; or (ii) or expenditure in relation to such event or occasion has been made or incurred, which amounts to or is likely to amount to fifty lakh rupees or more.
In the present case, the aforesaid conditions, as set out in Sub-section (1A) of Section 149 of the Act, are not satisfied.
We also consider it apposite to refer to an order passed by this Court in L-1 Identity Solutions Operating Company Private Limited v. Assistant Commissioner of Income Tax [W. P. (C) No. 4845 of 2025, dated 17-4-2025]/ 2025:DHC:2690-DB where this court had held as under:
"10. There is no cavil that the income alleged to have escaped assessment for the AY 2018-19 is under Rs. 50 lakhs. However, it is contended that the same would not preclude the AO from issuing a notice under Section 148 of the Act as cumulatively the income that is alleged to have escaped assessment is to the extent of 0.73 crores & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 8 Hiral Tapankumar Chudgar vs. ITO which is in excess of Rs. 50 lakhs. Mr Gupta, the learned counsel appearing for the Revenue has referred to Section 149(1A) of the Act in support of his contention.
Before proceeding further, it would be relevant to refer to Section 149 of the Act. The relevant extract of Section 149 of the Act is set out below: "149. Time limit for notice. - (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] (1A) Notwithstanding anything contained in subsection (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be."
It is apparent from the opening sentence of Section 149(1) of the Act that a notice under Section 148 of the Act for an assessment year cannot be issued beyond the period of three years unless the conditions under Section 149(1)(b) of the Act are satisfied. Thus, one of the said conditions is that the income alleged to have escaped assessment exceeds Rs. 50 lakhs or is likely to exceed Rs. 50 lakhs. Undisputably, the threshold amount of Rs. 50 lakhs of the income that has escaped assessment or is likely to escape assessment, is to be & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 9 Hiral Tapankumar Chudgar vs. ITO reckoned in respect of the specified assessment year. We say so because the conditions as set out in clause (b) of Section 149(1) of the Act are required to be read in conjunction with the opening sentence of Section 149(1) of the Act. The same is also made amply clear by use of the non obstante clause in Sub-section (1A) of Section 149 of the Act. A plain reading of Sub-section (1A) of Section 149 of the Act indicates that the condition of a minimum amount of Rs. 50 lakhs of income escaping assessment, may be satisfied by the cumulative amount that has escaped assessment or is likely to escape assessment in respect of more than one assessment year exceeding the said amount. However, the same is subject to the condition that the income chargeable to tax is represented in the form of an "asset" or "expenditure in relation to an event or occasion". Thus, in cases where the income that has escaped assessment is represented by 'an asset', notwithstanding that the said asset is on account of income that escaped assessment for more than one previous years, the condition under Section 149(1)(b) of the Act would be satisfied, if the value of the asset exceeds Rs. 50 lakhs. The same would hold true if there is an expenditure in relation to an 'event' or 'occasion', which exceeds the value of Rs. 50 lakhs. In this case as well as notwithstanding that the expenditure has been incurred in different previous years, the condition under Section 149(1)(b) of the Act would be satisfied if the cumulative value of the expenditure exceeds Rs. 50 lakhs, provided that the same is related to an event or occasion."
Concededly, the issue involved in the present case is covered by the decision of this court in L-1 Identity Solutions Operating Company Private Limited (supra). The petition is accordingly allowed and the impugned order dated 31.03.2024 passed under Section 148A(d) of the Act; the notice dated 31.03.2024 issued under Section 148 of the Act and the impugned assessment order dated 21.03.2025 are set aside.
Respectfully following the above judicial precedents and the escaped assessment is Rs.29,55,558/- which is less than Rs.50,00,000/-, therefore notice issued u/s. 148A beyond three years period is invalid in law. Consequently the reassessment order is liable to be quashed.
& 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 10 Hiral Tapankumar Chudgar vs. ITO for Asst. Year 2018-19
Brief facts of the case is that for the Asst. Year 2018-19, the assessee filed his Return of Income on 10-10-2018 declaring total income of Rs.1,38,580/-and exempt income of Rs.46,950. The assessee disclosed loss of Rs.52,86,454/- from security transaction. There was no regular assessment in the hands of the assessee. However the case was reopened for investment in penny stock of Kushal Ltd. to the extent of Rs.23,97,554/-. The assessee was issued with a show cause notice u/s. 148A(b) to explain why the alleged transaction of accommodation entries of Long Term Capital Gain or loss not to be treated as income chargeable to tax which has escaped assessment, within the meaning of Section 147 of the Act. The assessee vide its reply dated 24-03-2022 submitted the scrip “Kushal Ltd.” were purchased from open platform provided by BSE/NSE and were sourced from assessee’s own fund, Partner’s Capital and other borrowings.
11. The A.O. has simply relied on information from Investigation Wing but nowhere pointed out that information received bear the name of assessee or his broker, whereas the transactions were through banking channel. Though the assessee shown Short Term Capital Loss of Rs.52,86,454/- for the Asst. Year 2018-19, the same was not carried forward to the next Asst. Year 2019-20. Thus literally the assessee has not claimed the loss incurred during the Asst. Year 2018-19. Copy of the ITR filed for A.Y. 2019-20 also & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 11 Hiral Tapankumar Chudgar vs. ITO attached for ready reference. The Ld. A.O. considered the above reply and held that the loss of bogus entry is not allowable and proceeded with the reassessment by making addition of Rs.57,15,590/-.
12. Aggrieved against the reassessment order assessee filed appeal before Ld. CIT(A) who has given seven opportunities of hearing between 26-07-2024 to 08-11-2024. As there was no response from the assessee, passed exparte appellate order confirming the additions made by the assessing officer.
Aggrieved against the same, the assessee in appeal in for Asst. Year 2018-19 before us raising the following Grounds of Appeal:
1. On the facts and circumstances of the case, as well as the applicable law, the learned A.O. has erred in reopening the assessment under Section 147 of the Income Tax Act, 1961, by issuing a notice under Section 148. Further, CIT(Appeals) has erred in dismissing the appeal. The reopening of the assessment is unjustified and contrary to the provisions of the law.
2. On the facts and circumstances of the case, as well as the relevant legal provisions, the A.O. has wrongly disallowed the short-term capital loss of Rs.52,86,454/claimed by the assessee in relation to the security transaction in Kushal Ltd. The A.O. also incorrectly treated this transaction as an accommodation entry. Further, CIT(Appeals) has erred in dismissing the appeal. The disallowance of the short-term capital loss is incorrect both in law and in fact and is therefore requested to be deleted.
3. The A.O. has misinterpreted the law and the facts of the case by making an addition of Rs 23,97,554/-under Section 69A, relating to the source of investment through loans from the husband (Tapan Chudgar Rs. 14,00,000/-) and sister-in-law (Mans) Chudgar Rs. 9,97,554/ The A.O. erroneously treated these loans as bogus. Further, CIT(Appeals) has erred in dismissing the appeal. The addition of Rs. 23,97,554/- unjustified both in law and in fact, and it is respectfully requested that it be deleted.
& 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 12 Hiral Tapankumar Chudgar vs. ITO
4. The AO has also erred in making an addition of Rs. 31,39,854/-under Section 69 of the Income Tax Act, treating it as unexplained investment, when the source of this amount was the sale proceeds from previous transactions and the assessee's personal savings. The A.O. failed to review the BSE ledger, where it can be clearly seen that the sale proceeds from earlier transactions were directly utilized for the investment without being withdrawn into the bank account. Further, CIT(Appeals) has erred in dismissing the appeal. The addition of Rs. 31,39,854/- is erroneous and should be deleted.
5. Regarding the application of Section 115888 on the addition made concerning the source of investment in Kushal Ltd., the A.O. has wrongly invoked this section. The facts and evidence clearly indicate that there is no unaccounted or unexplained money under Sections 694 or 69 of the Income Tax Act, 1961, and no income has escaped assessment. Since there is no unexplained money or investment amounting to Rs. 55,37,408/-(Rs. 23,97,554/- Rs. 31,39,854/-), Section 115BBE cannot be applied. Further, CIT(Appeals) has erred in dismissing the appeal The application of Section 1158BE is therefore incorrect both in law and on facts, and it should be deleted.
6. The A.O has erred in treating the amount of Rs. 39,604/-claimed as dividend income in the ITB as commission income from Kushal Ltd. Further, CIT(Appeals) has erred in dismissing the appeal. This reclassification is wrong and should be rectified. 7. The A.O. has also erred in initiating penalty proceedings under Section 271AAC of the Income Tax Act for the addition of Rs. 55,37,408/- (Rs. 23,97,554/+Rs. 31,39,854/-) concerning the source of investment in Kushal Ltd. The initiation of penalty proceedings under Section 2704 for under- reporting of income is equally unjustified and should be quashed. 8. The appellant seeks permission to add, alter, amend, or withdraw any ground of appeal either before or during the hearing of this appeal.
We have considered the rival submissions and perused the materials available on record. The reply of the assessee in response to notice u/s. 148A(b) reads as follows:
& 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 13 Hiral Tapankumar Chudgar vs. ITO
“In the instant case, AO has made allegation of investment is a bogus accommodation entries. Purchase was made through BSE platform. Transaction was through banking channel after all, Investment in share scrip is capital in nature. If at all one has to tax then it has to be Capital Gain and not entire investment. For taxation of capital gain there has to be transfer of capital within the meaning of Sec 2(47) of the act. AO has not demonstrated any reason or belief that investment is unexplained. AO only relied upon information passed on from DDIT (Inv) Ahmedabad and failed to apply his observations on such information. However assessee in return under section 139(1) in respect to capital gain has declared income as stated below for Assessment Year: PARTICULARS AY 2018-19 SALE CONSIDERATION CG 65,87,059 COST OF ACQUISITION OF SHARE (1,18,73,513)
AMOUNT OF SHORT TERM CAPITAL LOSS (52,86,454) LOSS CLAIMED IN CURRENTYEAR - LOSS C/F TO NEXT YEAR (52,86,454) LOSS B/F IN NEXT YEAR i.e. A.Y. 2019-20 -
From above table it is seen that assessee has suffered lasses of Rs.52,86,454 for AY.2018-19. Assessee has carried forward the loss of Rs. 52,86,454/- of above assessment year to next year. However, it can be seen from the ITR that the losses were not brought forward in next assessment year i.e. ITR of A.Y. 2019-20; therefore it can be stated that the loss has not yet been claimed against any income till date. This clearly depicts that there is no loss to the revenue department or any suppression of income through set off of loss. The ITR of A.Y. 2018-19 and A.Y. 2019-20 are attached for your ready reference. We therefore request your honour to not to open re-assessment proceedings u/s 148 and oblige.
Perusal of the original Return of Income for the Asst. Year 2018-19 which was filed on 28-04-2022 claiming the current year & 44/Ahd/2025 A.Y. 2017-18 & 2018-19 Page No 14 Hiral Tapankumar Chudgar vs. ITO loss of Rs.52,86,454/- which is belatedly. Thus not eligible to set off under Sub-section (3) of Section 139 of the Act. Thus the allegation that there is escaped income of Rs.11,72,671/- is not correct but loss of Rs.52,86,454/- is also not claimed by the assessee by filing the return within the Section 139(1) or u/s 147 of the Act. Thus there is no escapement of income, therefore the reassessment proceedings is liable to be deleted. Thus the ground no. 1 raised by the assessee is allowed and remaining grounds does not require further adjudication.
In the result, the appeal filed by the assessee in is allowed.
Order pronounced in the open court on 12-08-2025 Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/08/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद