Kanubhai Ramdas Patel Vs ITO (ITAT Ahmedabad)
Approval Says “Commodity Trading”, Reasons Say “LTCG”-Defective 151 Approval Dooms Penny-Stock Reopening-Unsigned / Mismatched Sanction u/s 151 Is Fatal
Ahmedabad ITAT ‘SMC’ Bench in Kanubhai Ramdas Patel vs ITO (ITA No.1207/Ahd/2024, AY 2012-13, order dated 24-12-2025) allowed the assessee’s appeal and quashed the entire reassessment u/s 147 as void ab initio, holding that the mandatory approval u/s 151 suffered from fatal defects and total non-application of mind
Assessee, a proprietor engaged in agricultural trading, had filed ROI declaring income of ₹6.64 lakh, agricultural income of ₹4.12 lakh and claimed exempt LTCG of ₹26.16 lakh u/s 10(38) on sale of shares of Dhwanil Chemicals Ltd.. Based on search in Sanjay Shah & Jignesh Shah group, AO reopened the assessment alleging bogus LTCG accommodation entries, disallowed the exemption, added ₹26.80 lakh as bogus LTCG, ₹53,605 as commission, and ₹3.66 lakh as unexplained agricultural income. CIT(A), NFAC confirmed the additions.
Before ITAT, the assessee challenged the very jurisdiction of reopening, pointing out that:
- the PCIT’s approval u/s 151 referred to “commodity trading transactions”,
- whereas the reasons recorded u/s 147 were for alleged bogus LTCG in shares, and
- the statutory approval format itself was unsigned / mechanically filled, with a contradictory annexure relied upon by the Revenue.
ITAT carefully examined the reasons recorded, approval letter dated 29-03-2019 and annexure dated 28-03-2019, and held that:
