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Facts
The Revenue appealed the CIT(A)'s order quashing a reassessment. The reassessment was initiated based on information from a survey related to Midland Polymers Ltd, a company suspected of providing accommodation entries. The AO sought to tax sale proceeds of shares as accommodation entries. The assessee had also dealt in shares of Midland Polymers Ltd and incurred a short-term capital loss.
Held
The Tribunal held that the reassessment was invalid because the information on which it was based was already available to the AO during the original assessment proceedings. The Tribunal noted that the reassessment was initiated after the expiry of four years without fulfilling the conditions of the first proviso to Section 147 of the Income Tax Act.
Key Issues
Whether the reassessment proceedings were validly initiated when the information was already on record during the original assessment, and whether the first proviso to Section 147 was satisfied.
Sections Cited
143(3), 144, 144B, 147, 148, 44AD, 115BBE, 69, 133A, 10(38)
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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI C. N. PRASAD & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: The appeal in and CO 88/Del/2024 for AY 1. 2012-13, arises out of the order of the Commissioner of Income Tax (Appeals)-33, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 274/16-17 dated 22.03.2017 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.03.2015 by the Assessing Officer, DCIT, Circle-17(1), New Delhi (hereinafter referred to as „ld. AO‟). Page | 1 CO No. 88/Del/2024 Anil Kumar The only ground raised by the revenue in its appeal is whether the ld
2. CIT(A) was justified in quashing the reassessment as void ab initio in the facts and circumstances of the instant case.
We have heard the rival submission and perused the material available 3. on record. The assessee is an individual and had filed return of income for AY 2014-15 on 31.03.2015 declaring total income of Rs. 24,95,570/- and agricultural income of Rs. 1,18,000/-. The case was selected for scrutiny under CASS on the reasons “suspicion transaction relating to short term capital loss of shares” based on inputs from Investigation Wing. The assessee is a Chief Executive Officer (CEO) of M/s. Indo Fero Metal Pvt. Ltd . He is also founder and promoter of the company which mainly deals in export of agro and other related commodities. During the year under consideration, the assessee received salary income of Rs. 22,50,000/- from Indo Fero Metal Pvt. Ltd and profit of Rs. 3,45,568/- from the business of trading and offered u/s 44AD of the Act. The scrutiny assessment was completed u/s 143(3) of the Act on 26.12.2016 determining total income of Rs. 35,86,670/- wherein, the addition of Rs. 10,91,096/- on account of short term capital gain was made by the ld AO by denying the set off of short term capital loss of Rs. 12,15,050/-. The assessee preferred an appeal against this order which stood dismissed by the ld NFAC vide order dated 28.03.2023. On further appeal to the Tribunal, this Tribunal in for AY 2014-15 dated 02.06.2025 had allowed the appeal of the assessee by directing the ld AO to allow set off of short term capital loss of Rs. 12,15,050/- with the short term capital gains of Rs. 10,91,096/-.
The assessment of the assessee for AY 2014-15 was sought to be 4. reopened by the ld AO vide issuance of notice u/s 148 of the Act on 31.03.2021 after recording the reasons stating that the assessee had received sale proceeds of shares of Midland Polymers Ltd which has been categorized CO No. 88/Del/2024 Anil Kumar as a penny stock company and survey u/s 133A of the Act was conducted on Midland Polymers on 23.08.2017 wherein, the statement of various persons were recorded and various documents, books and electronic storage devices were impounded. During the survey, it transpired that the Midland Polymers Ltd is a penny stock company and engaged in providing accommodation entries and in connivance with certain entry operators and had allowed the share prices to be manipulated in the open market for affording wrongful gains to certain investors in the form of long term capital gain exempt u/s 10(38) of the Act or the short term capital loss to be set off with other gains. Since, the assessee had dealt in the shares of Midland Polymers Ltd in open market and had sold shares after duly suffering Securities Transaction Tax (STT), the sale proceeds received by the assessee was sought to be treated as accommodation entry and brought to tax u/s 69 read with Section 115BBE of the Act in the sum of Rs. 108,85,794/- vide reassessment order framed u/s 147 read with Section 144 r.w.s. 144B of the Act dated 25.03.2022. The assessee preferred an appeal against this reassessment order before the ld NFAC. The ld NFAC quashed the entire reassessment proceedings by observing as under:-
“Finding & Decision 7.1 The appellant in the grounds of appeal has contested that the re-opening of assessment proceeding is not valid, even when the relevant transaction was reflected in the original ITR and as well as during the original assessment proceeding. 7.2 During the course of the appellate proceeding, the appellant has raised objection on the validity of the re-assessment proceeding stating that the re- opening of assessment was based on the information which was already available at the time of the original assessment proceeding. In this regard the appellant has also relied upon certain case laws. 7.3 On perusal of the original assessment order u/s. 143(3) dated 26.12.2016, it is noticed that the AO made the addition in regard to the bogus short Term Capital loss claimed during the year after verification of share transaction made during the year. The details of the share transaction Page |
3. CO No. 88/Del/2024 Anil Kumar in regard to the Midland Polymers Ltd were available before the AO at the time of the original assessment proceeding and the same is clearly evidence from the original assessment order. The relevant portion of the same is re- produced as under:
7.4 This clearly shows that the details in regard to the information on which the case has been re-opened was already available before the AO at the time of the original assessment proceeding. Therefore, there was no new information to re-open the assessment proceeding u/s. 147 of the IT Act. In this regard the appellant has relied upon certain case laws, wherein it was held that the re-opening of the assessment proceeding is not valid based on the information which was already present before the AO during the earlier assessment proceeding. Relevant portion of the appellant submission is re- produced as under: “...Therefore the assumption of jurisdiction on a concluded issue by the A.O. by reappraising and re-appreciating the material already held on record cannot be said to be justified, more so in view of the celebrated decision of Hon‟ble Supreme Court in the case of CIT vs. M/s Kelvinator of India Ltd. 320ITR 561 (SC) and in the following judicial decisions:
CO No. 88/Del/2024 Anil Kumar Monoj Kumar Gupta vs. ITO., (2008) 114 TTJ 253 (Jaipur) Silver Mines vs. ITO., (2007) 110 TTJ 118 (Jaipur) Carlton Overseas Pvt. Ltd. Vs. ITO., (2009) 318 ITR 0295 (Del) CIT vs. Keane India Ltd, ITA 230/2012 dated 20.04.2012 (Del) Godrej Agrovet Ltd. Vs. DCIT., (2010) 323 ITR 0097 (Bombay) Balkrishna Hiralal Wani vs. ITO., (2010) 321 ITR 0519 (Bombay) ...” 7.5 Further the reliance is drawn upon in the decision of Honorable Supreme court of India in the case of Principal Commissioner of Income-tax v. Fibres and Fabrics International (P.) Ltd, wherein it was held: “... since said reason for reopening was based on same set of information which was available at time of original assessment proceedings, reopening of assessment based on a mere change of opinion was invalid and not permissible" [2022] 139 taxmann.com 562 (SC) ..." 7.6 Further the reliance is drawn upon in the decision of Hon‟ble High Court of Madras in the case of International Flavours Fragrances India (P.) Ltd. v. Joint Commissioner, wherein it was held: “... since assessee had made full disclosure at all stages of assessment and no failure was attributed to assessee in making disclosure in this regard, reassessment was unjustified[2020] 118 taxmann.com 494 (Madras) ..." 7.7 In view of the above discussion and respectfully following the above judicial pronouncements, it is clear that the initiation of proceeding u/s. 147 itself is not in purview of the Act as the transaction based on which case was re-opened was already available before the AO at the time of original Assessment proceeding 7.8 Further, the AO failed to acknowledge that the assessment proceeding were re-opened after the expiry of 4 years based on the Penny stock transaction which was duly reported by the appellant and the same is evident from the Assessment Order as well. Therefore, the "by reasons of the failure on the part of the assessee to disclose fully and truly all material facts” is not correct at all as the appellant has disposed his onus by bringing the relevant details on record long before the re-opening of the assessment during the course of the original assessment proceeding u/s. 143(3). The first Proviso to section 147 is every clear in this regard and the same is re-produced as under:
CO No. 88/Del/2024 Anil Kumar “.147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section- 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section-139 or in response to a notice issued under sub-section (1) of section-142 or section-148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: ...” 7.9 In view of the above & considering the facts of the case, the re- opening of the assessment is not as per the provisions of the Acts and invalid. Therefore, the assessment order passed consequent to the proceeding becomes invalid as well and accordingly the assessment order passed by the AO is quashed herewith.
As the re-assessment order (against which the appeal has been filed) itself has been quashed, there is no need to adjudicate the other grounds of appeal
9. In view of the above discussion, the appellant‟s appeal for the AY 2014-15 is allowed herewith.”
We find that the aforesaid findings of the ld CIT(A) were sought to be 5. buttressed by the ld DR before us by just stating that reopening has been carried out based on the outcome of the survey operations on 23.08.2017 in the case of Midland Polymers Ltd. But we find the ld CIT(A) in the original round of proceedings against the assessment order framed u/s 143(3) of the Act had dismissed the appeal of the assessee vide his order dated 28.03.2023 CO No. 88/Del/2024 Anil Kumar which is after the survey conducted on 23.08.2017 in the case of Midland Polymers Ltd. Hence, it gets clearly established that very same issue was already subject matter of consideration by the ld AO and the ld CIT(A) in the original scrutiny assessment proceedings itself and appeal thereon. Hence, it could be safely concluded that there was absolutely no fresh or tangible information available with the ld AO for reopening of the assessment for the year under consideration. In our considered opinion, the ld AO is only trying to re-appraise the existing facts already on record without having the benefit of any fresh or tangible information, which would have a live link to form a belief that income of the assessee had escaped assessment warranting reopening u/s 147 of the Act. This has been property appreciated by the ld CIT(A) while quashing the reassessment, on which we do not find any infirmity.
Since, the reassessment is quashed, the adjudication of other grounds 6. raised by the assessee in his cross objection becomes academic in nature and hence, they are left open.
In the result, the appeal of the revenue is dismissed and the CO of the 7. assessee is dismissed as infructuous.
Order pronounced in the open court on 15/12/2025.