ITO, WARD-2(3)(2), SURAT, SURAT vs. KISHOR BHANUBHAI ASODARIA, SURAT

4. Aggrieved against the appellate order, Revenue is in appeal raising the following Grounds of Appeal:

i. On the facts and circumstances of the case and in law the Ld CIT has erred in deleting the addition made of Rs. 1,22,92,546/ by the AO on account of cash credit u/s 68 of the Act in the disguise of exempted long term capital gains on account of sale of the share of JRI Industries and Infrastructure Limited, a penny stock and without appreciating the findings of the Assessing Officer that the price movement of the company were not supported by financial fundamentals of the company. ii. On the facts and circumstances of the case and in law the Ld CIT has erred in ignoring the facts brought on record establishing manipulation of share prices of JRI Industries and Infrastructure Limited as the upward movement of share price was not at all justified by the economic fundamental of company during the period of transactions by the assessee.

A.Y. 2015-16 Page No 4 ITO Vs. Kishor Bhanubhai Asodaria iii. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made by the Assessing Officer of Rs. 1,22,92,546/ ignoring the fact that the stock prices of the companies are manipulated to provide the bogus LTCG. iv. On the facts and circumstances of the case and law, the ld.CIT(A) has erred in allowing the claim ignoring the judicial pronouncement by the Hon’ble Supreme Court in the case of McDowell Vs CTO wherein it was held that "Colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges". v. On the facts and circumstances of the case and law, the ld.CIT(A) has erred in deleting the addition made of commission of Rs. 2,45,851/-u/s 69C of the Act purportedly incurred by the Assessee towards payment to brokers who allegedly entered into the share transactions at the behest of the Assessee overlooking the fact that the entire transactions were stage managed with the object to facilitate the Assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gains of Rs. 1,06,85,774/-based on the total sale consideration of Rs. 1,22,92,546/- and claim bogus exemption u/s.10(38) of the Act. vi. On the basis of the facts and circumstances of the case and in law, the ld. CIT(A) ought to have upheld the order of the Assessing Officer. vii. It is therefore prayed that the order of ld. CIT(A) may kindly be set aside that of the Assessing Officer be restored. viii. The appellant craves leave to add, alter, amend and/or withdraw any ground of appeal either before or during the course of hearing of the appeal.

5. Ld. Sr. D.R. appearing for the Revenue submitted that the Ld.CIT(A) erred in deleting the addition made on account of capital gains on penny stock scrip namely JRI Industries & Infrastructure Ltd. In support of the grounds of appeal, Ld. Sr. D.R. requested to sustain the addition made by the assessing officer and allow the Revenue appeal.

A.Y. 2015-16 Page No 5 ITO Vs. Kishor Bhanubhai Asodaria

6. Per contra, Ld. Counsel Shri Manish J Shah appearing for the assessee filed an Application under Rule 27 of ITAT Rules, which reads as under:

The applicant hereby prays of this Hon'ble Tribunal to allow the applicant to support the order of the ld. CIT(A) in appeal of the revenue on the following ground, under Rule 27 of the ITAT Rules, 1963. It is humbly submitted that, the ground raised is purely legal in nature affecting the jurisdiction of the Assessing Officer and does not require any further facts other than the ones which are on record for its adjudication. Reliance is placed on the judgement/order in Peter Vaz v. CIT - (2021) 436 ITR 616 (Bom) and ACIT v. M/s. Jyoti Ltd. - (copy attached herewith).

1. Notice issued u/s 148 as well as consequential reassessment order passed u/s 147, for A.Y. 2015-16, are bad in law on account of being time barred, in view of the judgment of the Hon'ble Supreme Court in the case of UOI v. Rajeev Bansal - (2024) 469 ITR 46 (SC) and the Hon'ble jurisdictional Gujarat High Court in the case of Mayurkumar Babubhai Patel v. ACIT-SCA No. 18099 of 2022. 6.1. Ld Counsel submitted that for the Asst. Year 2015-16 it is held that the notice u/s 148 was issued on 29-07-2022 which is beyond the limitation period prescribed u/s. 149 of the Act and therefore the reassessment is held to be barred by limitation as held by the Jurisdictional High Court in the case of Maurkumar Babubhai Patel -Vs- ACIT in Special Civil Application No. 3154 of 2022 vide judgment dated 17-06-2025 and placed on record the unreported judgment. Ld. Counsel further submitted that the Hon’ble High Court considered the Supreme Court Judgments in the case of Rajeev Bansal and Deepak Steel and Power Ltd. and held that the reopening of assessment made u/s. 148 on 29-07- A.Y. 2015-16 Page No 6 ITO Vs. Kishor Bhanubhai Asodaria 2022 relating to the Asst. Year 2015-16 was void ab initio and bad in law and therefore requested to dismiss the appeal filed by the Revenue.

7.1. It is undisputed fact that assessee filed his original Return of Income for the Asst. Year 2015-16 on 30-03-2016 declaring total income of Rs.3,17,040/-. No regular assessment was made on the original return. Subsequently based on the information received that the assessee was indulged in trading of shares of JRI Industries & Infrastructure Ltd. (JIIL) which is said to be penny stock used by brokers/entry operators, to provide accommodation entries, the assessment was reopened by issuing notice u/s.148 on 26-04-2021 and fresh notice u/s.148A[b] of the Act on 04-05-2022. After due process of law, the A.O. denied the benefit of claim of exemption u/s. 10(38) of the Act and made addition of Rs.1,22,92,546/- under section 68 of the Act. It is also not in dispute that the notice under section 148A(b) had been issued pursuant to the decision of the Hon’ble Apex Court in Ashish Agarwal dated 04.05.2022, which is admittedly after 31.03.2022. Therefore, on both counts, the notice issued under section 148A[b] of the Act for the Asst. year 2015-16 would be time barred.

A.Y. 2015-16 Page No 7 ITO Vs. Kishor Bhanubhai Asodaria 7.2. As rightly submitted by the Ld Counsel for the assessee, Jurisdictional High Court in the case of Maurkumar Babubhai Patel [cited supra] has considered the Supreme Court Judgments in the case of Rajeev Bansal and Deepak Steel and Power Ltd. and held that the reopening of assessment u/s. 148 on 29-07-2022 relating to the Asst. Year 2015-16 was void ab initio and bad in law by observing as follows:

“… 8. Therefore, we are left with the issue as to whether the notice issued under section 148A(b) of the Act by the respondent Assessing Officer in remaining four petitions would survive in view of the decision of the Apex Court in case of Union of India vs. Rajeev Bansal reported in 469 ITR 46 SC or not? 9. Learned advocate Mr. B.S.Soparkar for the petitioner referred to and relied upon the subsequent order/decision of the Hon’ble Apex Court in case of Deepak Steel and Power Ltd vs. Central Board of Direct Taxes reported in [2025] 174 taxmann.com 144 (SC) wherein, the Hon’ble Apex Court, after recording the concession of the learned advocate for the department and in view of the concession given before the Apex Court by learned advocate appearing for the Revenue as recorded in para 19(f) of the judgement in case of Rajeev Bansal (supra), has quashed and set aside the notice issued after 31.03.2021 under section 148A(b) of the Act for A.Y. 2015- 16 as under: “1. Leave granted.

2. These appeals arise from the order passed by the High Court of Orissa at Cuttack in Writ Petition (C) Nos. 2446 of 2023, 2543 of 2023 dated 1.2.2023 and 2544 of 2023 dated 10.02.2023 respectively by which the High Court disposed of the original writ petitions in the following terms:- “1. The memo of appearance filed by Mr. S. S. Mohapatra, learned Senior Standing Counsel for Revenue Department on behalf of Opposite Parties is taken on record.

2. In view of the order passed by this Court on 1st December, 2022 in a batch of writ petitions of which W.P.(C) No.9191 of 2022 (Kailash Kedia v. Income Tax Officer) was a lead matter and the subsequent order dated 10th January, 2023 passed in W.P.(C)

A.Y. 2015-16 Page No 8 ITO Vs. Kishor Bhanubhai Asodaria No.36314 of 2022 (Shiv Mettalicks Pvt. Ltd., Rourkela v. Principal Commissioner of Income Tax, Sambalpur), the Court declines to entertain the present writ petition, but leaves it open to the Petitioner to raise all grounds available to the Petitioner in accordance with law including the grounds urged in the present petition at the appropriate stage as explained by the Court in those orders.

3. The writ petition is disposed of in the above terms.”

7. The impugned notice therein stands quashed and set aside.

8. The relief in terms of prayer (a) is granted.

9. The appeals stand disposed of in the above terms.

10. Pending application(s), if any, stand disposed of.

A.Y. 2015-16 Page No 9 ITO Vs. Kishor Bhanubhai Asodaria  Assistant Commissioner of Income Tax, Circle 19(1) and ors vs. Nehal Ashit Shah in Special Leave Petition (Civil) Diary No. 57209/2024;  The Income Tax Officer Ward 1(2) Jaipur vs. R.K.Build Creations Private Limited in Special Leave Petition (Civil) Diary No. 59625/2024.

date of the notice to be issued by the Assessing Officer and, therefore, the term 'at that time' would also refer to the said date. On the said date, if a notice could not have been issued under the erstwhile provision of section 149(1)(b) for any assessment year beginning on or before the 1st day of April, 2021, the notice cannot be issued even under the new provisions. [Para 24]

■ Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under section 148. For the relevant assessment year, being assessment year 2015-2016, 6th year expired on 31st March, 2022. The notice under section 148, in the instant case, is issued on 27th August, 2022, i.e., clearly beyond the period of limitation prescribed in section 149 read with the first proviso to the said section. [Para 25] ■ The purpose of the first proviso to section 149 is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to assessment year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of section 149(1)(b) would be applicable and only from assessment year 2022- 2023, the period of ten years as provided in section 149(1)(b), would be applicable. The submission of the revenue to interpret the first proviso to section 149 to be applicable only for assessment years 2013-2014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April, 2021 is not sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing statue should be strictly construed. [Para 26] ■ The interpretation as canvassed by the revenue would render the first proviso to section 149 redundant and otiose. The time limit to issue notice under section 148 had already expired on 1st April, 2021, for assessment years 2013-2014 and 2014-2015, when section 148 was amended. Therefore, reopening for assessment years 2013-2014 and 2014-2015 had already been barred by limitation on 1st April, 2021. Accordingly, the extended period of ten years as provided in section 149(1)(b) would not have been applicable to assessment years 2013-2014 and 2014-2015, de hors the proviso. It is a settled principle of law that when limitation has already expired, it cannot be revived by way of a subsequent amendment and, hence, for assessment years 2013-2014 and 2014-2015 proviso to section 149 was not required. Hence, to give meaning to the proviso it has to be interpreted to be applicable for assessment years up to 2021-2022. The interpretation canvassed by the revenue would render the following parts of the proviso redundant - (i) 'at any time' in the first line of the proviso; (ii) 'beginning on or before 1st A.Y. 2015-16 Page No 12 ITO Vs. Kishor Bhanubhai Asodaria day of April, 2021,' in the second line of the proviso. (iii) 'at that time' in the fourth line of the proviso. If this court have to give effect to the interpretation suggested by the revenue, then the proviso would have read as under : "Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021; OR provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021". [Para 27] ■ Section has to be interpreted so as to give meaning to all the words/phrases used in the section and it should not be interpreted in such a way so as to render any part or phrase in the section otiose. As stated foresaid, if the interpretation canvassed by the revenue is to be accepted then, not only various parts of the section would be rendered otiose, one would have to also substitute one phrase with another phrase in the said section, which is clearly not permissible in law. [Para 28]

Whether the notice dated 27th August 2022 issued under section 148 of the Act is barred by limitation as per the first proviso to section 149 of the Act? ■ It was submitted on behalf of revenue that the period of limitation for the purposes of section 149 has to be seen with respect to the original notice under section 148 which was issued to petitioner on 8th April, 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March, 2022, the reassessment proceedings are within the period of limitation prescribed in section 149. It is not acceptable. Section 149 sets out, inter alia, the time limit for issuing notice under section 148. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148. The period of limitation as well as the said A.Y. 2015-16 Page No 13 ITO Vs. Kishor Bhanubhai Asodaria further restriction is framed/provided in respect of a notice under 148 and not for a notice under section 148A. The notice dated 8th April, 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A(b). Once the notice dated 8th April, 2021, has been treated as having been issued under section 148A(b), the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under section 149 or the restriction as per the first proviso below Section 149. Therefore, for considering the restriction on issue of a notice under section 148 prescribed in the first proviso to section 149, the fresh/presently impugned notice dated 27th August, 2022 issued under section 148 is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the assessment year 2015-2016, the erstwhile time limit of six years expired on 31st March, 2022 and, the impugned notice under section 148 has been issued on 27th August, 2022 and, therefore, the impugned notice dated 27th August, 2022 is barred by the restriction of the first proviso to section 149. [Para 29] ■ With respect to applicability of the fifth proviso and the sixth proviso to section 149(1)(b) for extension of limitation for issuing the notice under section 148, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in section 149(1) i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under section 149, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under section 148 being issued for assessment years up to 2021-22 beyond a certain date. Therefore, the way the section would operate, is first to decide whether a notice issued under section 148 is within the period of limitation in terms of section 149(1)(a) or (b). To decide whether the notice is within the period of limitation under section 149(1)(a) or (b), the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to section 149(1), then such period cannot be extended by fifth proviso and sixth proviso. only applicable with respect to the period of limitation prescribed in section 149(1) i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under section 149, however, the first proviso is an exception to the period of A.Y. 2015-16 Page No 14 ITO Vs. Kishor Bhanubhai Asodaria limitation and provides for a restriction on the notices under section 148 being issued for assessment years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under section 148 is within the period of limitation in terms of section 149(1)(a) or (b). To decide whether the notice is within the period of limitation under section 149(1)(a) or (b), the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to section 149(1), then such period cannot be extended by fifth proviso and sixth proviso. Even if the fifth and sixth provisos are held to be applicable, the impugned notice would still be beyond the period of limitation. The fifth proviso extends limitation with respect to the time or extended time allowed to an assessee as per the show cause notice issued under section 148A(b) or the period, during which the proceeding under section 148A are stayed by an order of injunction by any court. Hence, in the instant case, in view of the fifth proviso, the period to be excluded would be counted from 25th May, 2022, i.e., the date on which the show cause notice was issued under section 148A(b) by respondent No.

1. Further, the time period from 29th June, 2022 up to 4th July, 2022, cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no.

by the Revenue and the Rule

27. Application filed by the assessee is hereby allowed.

Order pronounced under proviso to Rule 34 of ITAT Rules, 1963 on 13 -08-2025 Sd/- Sd/- (BIJAYANANDA PRUSETH) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 13/08/2025 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, सूरत