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Facts
The assessee, engaged in trading and investment of shares/securities and providing loans, filed a nil return for AY 2016-17. The case was reopened u/s 147, and the AO made an addition of ₹4,47,48,164/- as unexplained cash credit u/s 68 for alleged losses from derivative and stock options. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the assessment order framed by the National Faceless Assessment Centre (NFAC) was without jurisdiction as the relevant provisions of Section 151A were notified on the same day the order was framed. Furthermore, the reopening of assessment was deemed bad in law due to non-application of mind and borrowed satisfaction, as the assessee had no dealings with the brokers whose statements were relied upon by the AO. The Tribunal quashed the assessment and the reopening.
Key Issues
1. Whether the assessment order framed by NFAC was without jurisdiction given the timing of notification of Section 151A. 2. Whether the reopening of assessment u/s 147 was valid when based on non-application of mind and borrowed satisfaction.
Sections Cited
Section 147, Section 143(3), Section 143(2), Section 148, Section 142(1), Section 144B, Section 68, Section 151, Section 151A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
(Assessment Year: 2016-17) Assam Valley Finance and DCIT, Circle 1 Investment Pvt. ltd. Aayakar Bhawan, Christian Basti, House No.1, Niligiri Path, G.S road, Guwahati-781005, Vs. Zoo Road, Guwahati-781024 Assam (Appellant) (Respondent) PAN No. AABCA6974B Assessee by : Shri Miraj D Shah, AR Revenue by : Shri Santosh Kumar Karnani, DR Date of hearing: 12.11.2025 Date of pronouncement: 18.12.2025 O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 06.03.2025 for the AY 2016-17.
At the time of hearing, the ld. Counsel for the assessee pressed ground no.12 and 13 only, which are extracted below:-
12. For that the assessment order passed u/s 147/143(3) of the Income Tax Act, 1961 was without jurisdiction and hence the Ld CIT(A) erred in confirming the assessment order. The assessment order was bad in law and should be quashed. 13. For that the facts and circumstances of the case the notice u/s 143(2) of the Income Tax Act 1961 was without jurisdiction and bad in law and hence the entire assessment order is bad in law and the same should be quashed.
2.2. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee.
2.3. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessment has been framed by the National Faceless assessment Centre, Delhi vide order dated 29.03.2022, passed u/s 147 read with section 144B of the Act. We note that notice u/s 143(2) of the Act was issued on 15.03.2021, and thereafter, the notices u/s 142(1) of the Act, were issued on 25.01.2022 and 06.02.2022, which were duly complied with the assessee. The ld. AO noted that the assessee has shown loss 2.4. The ld. Counsel for the assessee submitted before us that the provisions of Section 151 of the Act were inserted into the statute book with effect from November 1, 2020 and these provisions were modified on 29.03.2022 vide notification number 18/2022 on the e- assessment of income escaping assessment of income, 2022. The ld. AR submitted that notice issued by NFAC as well as consequent assessment framed is without jurisdiction as these provisions were notified on 29.03.2022, when the order itself was framed by the NFAC on 29.03.2022. The ld. AR relied on the decision of co-ordinate bench in case of MD Mahimud SK vs. ITO in & 2229/KOL/2024 for A.Y. 2015-16 & 2017-18 vide order dated 04.03.2025, wherein the co-ordinate bench held as under:-
“11. We have perused the section of Section 151A of the Act, which deals with the faceless assessment of income escaping assessment and was brought on the statute book by taxation and other law (realization and amendment of certain provisions) Act, 2020, with effect from 01.11.2020 which was notified on 29.03.2022 vide notification no.18/2022/F. No. 370142/16/2022-TPL(Part)]. Therefore, the assessment proceedings were taken by the National Faceless Assessment Centre, Delhi by issuing notice u/s 142(1) dated 09.02.2022 and thereafter the assessment was framed accordingly after issuing show cause notice which in our opinion is without jurisdiction. The provisionw of Section 151A of the Act were broughton the statute book with effect from 01.11.2020. However, the same were made effective and applicable with effect from 29.03.2022 vide notification no. when the CBDT notified the new scheme for assessment of income escaping assessment scheme, 2022. In our considered view the assessment framed is without jurisdiction and cannot be sustained. The case of the assessee find force from the decision of Nabiul Industrial Metal Pvt. Ltd., Paschim Medinipur VS. I.T.O., in for A.Y. 2017-18, the order dated 15.10.2024, wherein a similar issue has been decided in favor of the assessee. For the sake of ready reference, the notice issued u/s 142(1) dated 09.02.2022 and show cause notice dated 17.03.2022, are extracted below:-
2.6. So far as the re-opening of assessment is concerned, we observe that the same is made with total non-application of mind and in a casual manner as the name of the brokers whose statements were recorded by the investigation wing who admitted to have done trading to generate loss but we note that they did not have any dealings with the assessee. In other words, the assessee never executed any trades through that brokers. Therefore, reopening of assessment is bad in law. We note that the assessee has been engaged in trading and investment in shares as well as providing loans and advances. It was the allegation of the ld. AO in the reasons to believe that the assessee M/s Assam Valley Finance and Investment Pvt. Ltd. has indulged in reporting of non-genuine profit/ loss as illiquid derivations of Bombay Stock Exchange platform thereby claiming fictious loss in equity / derivative trading during the financial year. The ld. AO noted that the assessee has entered into these transactions through brokers namely harish Kumar Singhania, Pawan Kumar Kayan and Sanjay Kumar Periwal etc., who in their “6. In our opinion, the AO has to exercise powers as conferred upon him by section 147 r.w.s. 148 of the Act with great care and caution as by exercising the reassessment jurisdiction u/s. 147, the AO unsettles the already completed assessment putting the assessee to a huge inconvenience and harassment. In the present case, the AO has incorrectly reopened the assessment by not even verifying the facts that there were no trades in F & O segments executed by the brokers referred to by the both the authorities. Therefore, considering these facts and circumstances the reopening of assessment is void ab initio and invalid in the eyes of law on the ground of non application of independent application of mind to the information received from the wing as well as on barrowed satisfaction. The case of the assessee finds support from the decision in the case PCIT Vs Meenakshi Overseas Pvt Ltd (2017) 82 taxmann.com 300 (Del). In the said decision, Hon'ble Delhi High Court has held that where the reasons to believe contain not the reasons but the conclusions of the AO one after the other and there was no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The Hon'ble High Court has held that the conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a borrowed satisfaction. Besides the case of the assessee is squarely covered by the decisions of CIT vs. SFIL Stock Broking Ltd. in [2010] 325 ITR 285 (Del) ,GRD Commodities Ltd Vs PCIT (2023) 149 taxmann.com 223(Cal), PCIT Vs Shodiman
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 18.12.2025.