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Facts
The assessee company appealed against orders related to Assessment Year 2016-17 and 2017-18. For AY 2016-17, the case was reopened based on information about rotation of funds. For AY 2017-18, additions were made for funds received and sale of shares.
Held
For AY 2016-17, the Tribunal held that the reassessment order was made beyond the jurisdiction of the Assessing Officer as the additions were not based on the reasons recorded for reopening. For AY 2017-18, the Tribunal allowed the appeal, deleting the addition for funds received from M/s Navyuga Consultancy as identity and creditworthiness were established. The addition for sale of shares was also deleted as the sale price was higher than the fair market value and the identity of the buyer was established.
Key Issues
Whether the reassessment order for AY 2016-17 was passed without jurisdiction as additions were made beyond the reasons recorded for reopening. Whether the additions for unexplained credits for AY 2017-18 were justified.
Sections Cited
147, 143(3), 148, 68, 115BBE, 56(2)(viib)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
The captioned two appeals are filed by the Assessee against two separate orders of ld. Commissioner of Income Tax (Appeals), New Delhi, both dated 29.03.2025 arising out of the Assessment Order for Assessment Year 2016-17 passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (“the Act”) dated 28.03.2022 and for Assessment Year 2017-18 passed u/s 143(3) of the Act dated 17.12.2019.
Stance Consumer Electronics Pvt. Ltd. vs. DCIT 2. Since, both the appeals are of one assessee and having common issues, therefore, they are taken together and decided by a common order.
Brief facts of the case are that assessee is a company and filed its return of income on 07.10.2016 declaring total loss of Rs.71,684/-. The case of the assessee was reopened in terms of notice issued on 30.03.2021 u/s 148 based on the information received from Investigation Wing that assessee has allegedly involved in rotation of huge amount of funds without any economic rational and during the year had made transactions with M/s Concise Exim Pvt. Ltd. of Rs. 39,27,750/-. Accordingly, satisfaction was recorded by the AO by alleging that transactions with M/s Concise Exim Pvt. Ltd. are accommodation entries which has escaped assessment. Thereafter the reassessment order was passed on 28.03.2022 u/s 147/143(3) of the Act by making an addition of Rs.1,99,12,000/- towards sale consideration received from M/s Khan Kinetic Treatment (P) Ltd (Rs. 65,50,000/-), M/s Youl Production (1) Pvt Ltd (Rs. 68,12,000/-) and M/s Thapar Infrastructure Pvt Ltd (Rs. 65,50,000/-) on the sale of shares of M/s Prominent Agency Pvt Ltd by treating the same as unexplained credit u/s 68 of the Act.
Against the said order, appeal was filed before the Ld. CIT(A) who vide impugned order dated 29.03.2025, dismissed the appeal of the assessee.
Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking following grounds of appeal:
Stance Consumer Electronics Pvt. Ltd. vs. DCIT “1. That the order dated 29.03.2025 passed u/s 250 of the Income -tax Act, 1961 (hereinafter called the "Act") by the Commissioner of Income Tax (Appeals)-30, New Delhi is against law and facts on the file in as much as he has not justified to uphold the validity of the action of the Ld. Assessing Officer, Income Tax Department, NFAC resorting to reassessment proceeding and issuing notice u/s 148 of the Act since the same is bad in law in as much as but not limited to the fact that the addition was not made on the reason on which the case was reopened u/s 148.
2. That the order dated 29.03.2025 passed u/s 250 of the Act by the Commissioner of Income Tax (Appeals)-30, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld. Assessing Officer, Income Tax Department, NFAC in adding back a sum of Rs. 1,99,12,000/- in respect of credit received from M/s Khan Kinetic Treatment (P) Ltd (Rs. 65,50,000/-), M/s Youl Production (1) Pvt Ltd (Rs. 68,12,000/- and M/s Thapar Infrastructure Pvt Ltd (Rs. 65,50,000/-) on account of sale proceeds of shares of M/s Prominent Agency Pvt Ltd by treating the same as unexplained credit u/s 68 of the Act on the ground that no justification for sale of the shares at such high price is furnished despite specific query in this regard by ignoring the fact that complete details and exhaustive evidence with respect to the said transaction was duly filed in the course of (re)assessment proceedings and that the amounts received are not in the nature of cash credits but on account of sale of shares.
3. That the Appellant craves to add, amend, alter, modify or delete any or all of the grounds of appeal before or at the time of hearing.”
Heard both the parties and peruse the material available on record. In Ground of Appeal No.3, assessee has challenged the addition of Rs.1,99,12,000/- made by AO by alleging that the consideration received from three companies from the sale of shares as accommodation entry. The claim of the assessee was that in the reasons recorded before reopening the assessment u/s 147, satisfaction was recorded of escapement of income to the extent of Rs.39,27,750/- being rotation of money through transactions with M/s Concise Exim Pvt. Ltd. which were alleged as accommodation entry, however, no addition whatsoever was made on this account in the reassessment order passed and the consideration received from the sale of shares was added as unexplained credits u/s 68 of the Act. The reasons recorded
Stance Consumer Electronics Pvt. Ltd. vs. DCIT before issue of notice u/s 148 as available at pages 35 to 38 of the PB are reproduced herein below:
Stance Consumer Electronics Pvt. Ltd. vs. DCIT 8. From the perusal of the reasons as reproduced above, it is observed that the reasons were recorded before reopening of the case of the assessee for the alleged transactions with M/s Concise Exim Pvt. Ltd. and based on this allegation, AO concluded that these transaction are rotation of money and, accordingly satisfaction was recorded of escapement of income of the transaction of Rs. 39,27,750/- carried out by the assessee company with M/s Concise Exim Pvt. Ltd. However, from the perusal of the reassessment order, we observed that in the assessment order, there is no whisper of the transactions with M/s Concise Exim Pvt. Ltd. nor any addition was made for the alleged transactions with M/s Concise Exim, which was made the sole basis for initiating reassessment proceedings in the case of assessee. In the reassessment order, addition is made u/s 68 of the Act for the consideration received from the sale of shares of M/s Prominent Agency Pvt. Ltd. from three companies by alleging the same as accommodation entries. Since, the AO has not made any addition with respect to the satisfaction recorded in the reasons recorded of the transaction with M/s Concise Exim Pvt. Ltd., the AO has no jurisdiction to go beyond the reasons recorded and cannot made the addition on the issue which are not forming part of the reasons recorded.
The Hon’ble Delhi High Court in the case of M/s Ranbaxy Laboratories Ltd. vs. CIT [2011] 336 ITR 136 (Dehi) has held as under: "In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items viz. club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-1 as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc. proceeded to make deductions under sections 80HH and 80-1 and accordingly reduced the claim on these accounts.
Stance Consumer Electronics Pvt. Ltd. vs. DCIT The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-1 which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-ID as well. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of revenue and the second part of the question against the revenue.”
The Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bombay) has also expressed the same view. Thus, by respectfully following the aforesaid judgments of the Hon’ble Jurisdictional High Court and of the hon’ble Bombay High Court wherein it is held that the reassessment order passed by making additions beyond the reasons recorded is without jurisdiction when the Assessing Officer has not made any addition on the reasons recorded for initiating the reassessment proceedings. In the instant case, as observed above, the additions were made for the issues not forming part of the reasons recoded and no addition was made for the issue raised in the reason for reopening the assessment thus, we hold that the AO has exceeded his jurisdiction and made the additions beyond the satisfaction of escapement of income. Therefore, the reassessment order passed u/s 147/143(3) dt. 28.03.2022 is without jurisdiction and is quashed. Accordingly, Ground of appeal No. 3 of the assessee is allowed.
Stance Consumer Electronics Pvt. Ltd. vs. DCIT 11. Since we have already allowed the legal ground of appeal No.3 taken by the assessee, the other grounds of appeal taken on merits of the additions are not adjudicated. for Assessment Year 2017-18
Brief facts of the case are that assessee has filed its return of income on 29.10.2017, declaring total income of Rs.1,10,662/-. The case of the assessee was taken up for scrutiny and the assessment order was passed u/s 143(3) of the Act dated 17.12.2019 wherein the addition of Rs.12,00,000/- was made u/s 68 of the Act on account of funds received from M/s Navyuga Consultancy Pvt. Ltd. and further Rs.1,45,00,000/- received from the sale of shares of M/s Prominent Agency Pvt. Ltd. to M/s Vandam Technologies Private Limited as unexplained credits and made addition u/s 68 of the Act. Accordingly, the total income of the assessee was assessed at Rs.1,58,10,662/-. The AO further made protective addition of Rs. 1,45,00,000/- as short term capital gains with the observation that it will become substantive addition in case addition u/s 68 is deleted by the appellate authorities.
Against the said order, assessee filed appeal before the Ld. CIT(A) who vide order dated 29.03.2025, has partly allowed the appeal of the assessee, wherein both the additions u/s 68 were confirmed and protective addition made as short term capital gains was deleted.
Stance Consumer Electronics Pvt. Ltd. vs. DCIT 15. Aggrieved by the order of ld. CIT(A), assessee preferred the present appeal before the Tribunal by raising following grounds of appeal:
“1. That the order dated 29.03.2025 passed u/s 250 of the Act by the Commissioner of Income Tax (Appeals)-30, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld. Assessing Officer, Income Taxх Department, NFAC in adding back a sum of Rs.12,00,000/- received from M/s Navyuga Consultancy Pvt Ltd by invoking the provisions of Section 68 of the Act and applying the provisions of Section 115BBE of the Act thereto.
That the order dated 29.03.2025 passed u/s 250 of the Act by the Commissioner of Income Tax (Appeals)-30, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld. Assessing Officer, Income Tax Department, NFAC in adding back a sum of Rs. 1,45,00,000/- received from M/s Prominent Agency Pvt Ltd on account of sale of shares by treating the same as an alleged unexplained cash credit u/s 68 of the Act and applying the provisions of Section 115BВЕ of the Act thereto.
That the Appellant craves to add, amend, alter, modify or delete any or all of the grounds of appeal before or at the time of hearing.”
16. Heard both the parties and perused the materials available on record. The claim of the assessee is that during the course of reassessment proceedings, identity and creditworthiness of both the parties were established by filing their confirmations and the acknowledge of their return of income. The Ld. AR of the assessee further claims that in the case of M/s Navyuga Consultancy Pvt. Ltd. the assessment for Assessment Year 2017-18 was completed u/s 143(3) wherein after considering the facts of the case, income declared was accepted and no adverse interference was drawn with respect to the amount given to assessee company. We observed that by filing the confirmations and copy of ITR, assessee has proved the identity of both the parties. The assessee has received of Rs.12,00,000/- from M/s Navyuga Consultancy Pvt. Ltd, through banking channel and the copy of the bank statements of the said parties is also filed. From the perusal of the bank statements,
Stance Consumer Electronics Pvt. Ltd. vs. DCIT it is observed that there was sufficient balance available while transferring the funds to the assessee. Besides this, the company M/s Navyuga Consultancy Pvt. Ltd. has filed its return of income declaring total income of Rs.83,25,176/- and the said income stood accepted by the Department in the order passed u/s 143(3) of the Act. Looking to these facts, in our considered opinion, the identity as well as creditworthiness of the company M/s Navyuga Consultancy Pvt. Ltd. is established and, therefore, the amount received from the said company cannot be held as unexplained cash credit and, thus, the addition made on this account is hereby deleted. Ground of appeal No.1 of the assessee is allowed.
17. Regarding addition of Rs.1,45,00,000/-, being consideration received from the sale of shares of M/s Prominent Agency Pvt. Ltd. to M/s Vandam Technologies Pvt. Ltd. alleged as unexplained credit, the Assessing Officer in para 8 of the order observed that has received premium of Rs.1,45,00,000/- and no valuation report was filed for valuation of shares of M/s. Prominent Agencies Pvt. Ltd. at Rs.300/- per shares. In case the AO has doubts about the value of the shares sold by the assessee, the addition should have been made in section 56(2) however, the AO has made the addition by treating the said sale consideration as unexplained cash credit u/s 68 of the Act which stood confirmed by ld. CIT(A). It is further observed that in order to establish the genuineness of the transaction and creditworthiness of the buyer namely M/s Vandam Technologies Pvt. Ltd., assessee filed its confirmation and bank statement for the relevant period when funds were transferred to assessee and also filed copy of its ITR. It is further observed that assessee has sold shares to M/s Vandam Technologies Pvt. Ltd. which were purchased by it for Rs. 300/- only thus, no profit nor any loss was occurred to the assessee from the sale of shares of Prominent Agency (P) Ltd. The assessee submits before the ld. CIT(A) that the value
Stance Consumer Electronics Pvt. Ltd. vs. DCIT of the shares sold was worked out at Rs.38.21 per share and as per Explanation to section 56(2)(viib) of the Act, fair market value of the shares is defined which reads as under:- 56 (1)…………….. (2) (viib) …… (Explanation For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licenses, franchises or my other business or commercial rights of similar nature, whichever is higher;
From the above, it is evident that the fair market value is to be taken either of the two “whichever is higher”. In the instant case, the assessee has sold the shares at Rs. 300/- per share whereas according to the Net Asset Value (NAV) method, it comes to Rs. 38.21 per share. Since, the sale price is higher than the valuation as per NAV, in terms of Explanation to clause (viib) to sub-section (2) to section 56 of the Act no addition could be made.
Once it is admitted that the said sum of Rs. 1.50 crores was the consideration received by the assessee from the sale of shares owned by it, no addition could be made u/s 68 of the Act by treating the same unexplained credit more particularly when the assessee has been able to establish the identity of the buyer. Since, the ld. CIT(A) deleted the alternate addition made by the AO as Short term capital gains of Rs. 1.45 crores and no appeal is filed by the revenue against the same, the issue of Stance Consumer Electronics Pvt. Ltd. vs. DCIT treating the sale consideration of such sale as unexplained does not arise. Accordingly, the addition of Rs.1,45,00,000/- made u/s 68 of the Act is hereby deleted. Ground of appeal No.2 raised by the assessee is thus allowed.
In the result appeal of the assessee for AY 2017-18 in is allowed.
Order pronounced in the open court 13.02.2026.