Reopening After 4 Years on Same “Hawala Purchase” Material = Mere Change of Opinion: Pune ITAT Quashes Reassessment

Lorgan Lifestyle Limited Vs DCIT (ITAT Pune)

Reopening After 4 Years on Same “Hawala Purchase” Material = Mere Change of Opinion: Pune ITAT Quashes Reassessment

The Pune ITAT quashed reassessment proceedings initiated after four years where the AO attempted to reopen completed scrutiny assessment merely on the basis of the very same “hawala purchase” information already examined during original proceedings under section 143(3).

In the case of Lorgan Lifestyle Limited (erstwhile Sri Sidhivinayak Marketing), the AO reopened assessment alleging bogus purchases of over ₹6.86 crore from parties identified by the Sales Tax Department as accommodation entry providers. The reassessment ultimately resulted in addition of ₹85.77 lakh being 12.5% of alleged bogus purchases.

However, the Tribunal found that during the original scrutiny itself, the AO had specifically examined the alleged hawala purchases, called for purchase bills, export documents, bank statements, VAT details, H Forms and quantitative records, and thereafter consciously accepted the purchases as genuine while completing assessment under section 143(3).

The ITAT strongly noted that the reopening reasons themselves began with the words “on perusal of assessment records”, clearly showing that the AO relied only on existing material already available in original assessment records and not on any fresh tangible material or independent investigation.

The Tribunal held that once the issue had already been examined in original scrutiny proceedings, reopening on the very same facts amounted to a mere change of opinion, which is impermissible – particularly when reassessment was initiated beyond four years.

Relying on Bombay High Court rulings including Lupin Limited v. DCIT, Titanor Components Ltd. v. ACIT and Crompton Greaves Ltd. v. ACIT, the ITAT reiterated that reassessment after four years is invalid unless there is failure by the assessee to fully and truly disclose material facts. Since all purchase details, export records and supporting documents were already disclosed during original scrutiny, the reassessment was quashed in entirety.

FULL TEXT OF THE ORDER OF ITAT PUNE

The captioned appeal at the instance of assessee pertaining to A.Y. 2011-12 is directed against the order dated 11.09.2025 framed by National Faceless Appeal Centre, Delhi arising out of Assessment Order dated 27.12.2018 passed u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (in short ‘the Act’).

2. Assessee has raised following grounds of appeal :

“1. Ground No. 1

The Ld. Commissioner of Income Tax has erred in not appreciating that the re-opening of assessment u/s 147 despite the expiry of the time limit prescribed in the proviso to Section 147 of the Act, in a case where an assessment had already been completed u/s 143(3) is bad in law and deserves to be annulled as time-barred.

2. Ground No. 2

The Ld. Commissioner of Income Tax has erred in not considering that the re-opening of assessment u/s 147 was initiated merely on account of a “change of opinion” or for conducting “further enquiry” on facts that were already available and duly examined during the original assessment u/s 143(3). Therefore, the re-opening is invalid and liable to be quashed.

3. Ground No. 3

Without prejudice to Grounds 1 and 2, the Ld. Commissioner of Income Tax has erred in disregarding the detailed submissions placed on record and in treating genuine purchases amounting to Rs. 6,86,16,409/- as bogus, thereby making an unjustified and unwarranted disallowance. The said disallowance deserves to be deleted.

4. Ground No. 4

Without prejudice to the above grounds, the Ld. Commissioner of Income Tax has erred in making an addition of the entire purchase value instead of restricting the addition, if any, only to the profit element embedded therein. The excessive and unreasonable addition therefore requires to be deleted.”

3. Brief facts of the case are that the assessee is a partnership firm and income of Rs.34,77,401/- declared in the return of income for A.Y. 2011-12 filed on 29.09.2011. Case selected for regular complete scrutiny and various details called for by the Assessing Officer were submitted in response to notice u/s.142(1) of the Act. Assessment u/s.143(3) completed on 14.02.2014 accepting the returned income. Thereafter, notice u/s.148 of the Act issued on 30.03.2018 for reopening of the assessment. The assessee raised objections which were disposed off. Assessee filed return in compliance to notice u/s.148 of the Act declaring same income as was declared in the original return. Main reason for reopening was to examine the purchases made from three parties which as per the Assessing Officer are allegedly engaged in providing accommodation entries. Assessee furnished all the details about the purchases made from the three parties out of which purchases against H Form were made from the two parties namely Akshata Enterprises and Sangam Enterprises and purchase of tax free textiles were made from the third party namely Citybase Multitrade Pvt. Ltd. Assessee also contended that all the goods have been exported. However, ld. Assessing Officer without disputing the gross turnover including exports, concluded the proceedings making addition for bogus/inflated purchases and assessed income at Rs.7,20,93,809/-. Aggrieved assesee preferred appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal.

4. We first take up legal issue raised in Ground No. 1 and Ground No.2. Assessee raised the legal issue challenging the validity of reopening proceedings carried out beyond four years stating that it is a mere change of opinion as the assessee has truly and fully disclosed all material facts in the return as well as details have been filed in the regular scrutiny proceedings u/s.143(3) of the Act and there being no independent investigation or new information available with the Assessing Officer which could show that assessee has not disclosed the same in the income tax return and previous assessment proceedings u/s.143(3) of the Act.

5. Ld. Counsel for the assessee made reference to the order sheet of the regular assessment proceedings u/s.143(3) of the Act and indicated that the issue of Hawala/bogus purchases based on the information received by the Assessing Officer already stands examined and all details were produced before the Assessing Officer who after examining the same has accepted the transaction and has not made any addition. He further submitted that on the basis of very same information now the Assessing Officer has made addition for the bogus purchases which is a mere change of opinion and in light of the settled judicial precedents the same is uncalled for. Reliance placed on the various decisions including that of Hon’ble Jurisdictional High Court in the case of Lupin Limited Vs. DCIT – Writ Petition No.1530 of 2022 dated 18.02.2025.

6. On the other hand, ld. DR submitted that the objections raised by the assessee have been duly disposed of and since the assessee could not produce the bank statement of suppliers, their tax returns, purchases remained unverified and therefore the reopening is valid.

7. We have heard the rival contentions and perused the record placed before us. The legal issue has been raised by the assessee challenging the validity of reassessment proceedings carried out beyond four years from the end of relevant assessment year on the ground that without any independent investigation and new information, ld. Assessing Officer has carried out the reassessment proceedings based on the information already available in the assessment records of the regular scrutiny proceedings u/s.143(3) of the Act. It has been consistently held that in a case where the assessee has filed regular return of income and has also passed through regular scrutiny proceedings u/s.143(3) of the Act and the assessee has disclosed fully and truly all material facts necessary for its assessment and if after four years the re-assessment proceedings are initiated without referring to any new information or independent investigation by the ld. Assessing Officer then such reassessment proceedings are merely change of opinion of the Assessing Officer and are therefore liable to be held as bad in law and invalid. We take note of the recent decision of this Tribunal in the case of ACIT Vs. Prasanna Purple Mobility Solutions Private Limited in ITA No.871/PUN/2023 dated 19.02.2026 where similar issue has been dealt and the relevant finding of Tribunal reads as under :

“13. We note that the reasons recorded by the ld. Assessing Officer reads as under :

“REASONS FOR RE-OPENING OF PROCEEDINGS OF ASSESSMENT IN THE CASE OF M/S PRASANNA PURPLE MOBILITY SOLUTIONS PVT. LTD. FOR A.Y. 2011-12

(PAN-AAACO9763H)

In this case, the assessee has filed its original return of income for the A.Y. 2011-12 on 30.09.2011 declaring the total loss of Rs.10,99,52,953/- and revised return on 22.03.2012 declaring total loss of Rs. 10,99,52,953/-. The scrutiny assessment u/s 143(3) of the income-tax Act, 1961 (the Act) was completed on 28.03.2014.

It was noticed that during the year assessee company has issued 195589 shares having face value of Rs. 10 each at a premium of Rs.1584/- per share and assessee company accordingly accounted share premium of Rs. 30,18,92,976/- as its Capital and Reserve Surplus.

The assessee vide its submission dated 12.07.2017 has stated that Shares at a premium have been issued to (a) Ambit Pragma Fund Scheme-1 for Rs.5,85,41,244/- (b) Rainbow Ventures Ltd. (Mauritius) for Rs. 24,18,57,910/- and (c) Prasanna Patwardhan (Pune) for Rs.37,74,672/-. The Balance Sheet as on 31^st March 2010 in respect of Prasanna Purple Mobility Solutions shows an increase in the shareholders funds from Rs.19,37,96,180/- to Rs.49,42,86,046/- as on 31st March 2011.

It is to be noted here that the assessee company has been incurring losses since its inception. The earnings per share (EPS) on the assessee company’s shares for AY 2010-11 (Previous year) shows a loss of Rs.392.48/- per share. There was hardly any networth in the company to justify such high Premium. Further, there has been no submission on the part of the assessee to explain the reason behind high Premium. If we consider the assessee’s reserves, profits and earnings for the said AY, even they do not justify the huge Premium. Thus the Premium received is unreasonable. The Hon’ble Bombay High court in the case of Major Metals Ltd Vs Union of India (207 Taxmann.com 185) has upheld the addition of the entire amount of share capital on the ground that if the shares are issued at unjustifiable amount of premium the entire transaction is sham.

In view of the above, I therefore have reasons to believe that the income chargeable to tax for AY 2011-12 has escaped assessment and is likely to amount to one lakh rupee or more for AY 2011-12 as per the provisions of section 147 of the Act.

Requirements:

1. As per request the copy of the reasons is enclosed herewith for your information.

2. Party wise details in respect of share premium issued of Rs.30,18,92,976/- during FY 2010-11 alongwith supporting evidences.

3. To explain the reasons behind the shares issued 195589 having face value of Rs. 10/- each at Premium of Rs.1584/- per share.

4. To justify the reasons for such high premium alongwith supporting evidences.”

14. Now in order to examine the contentions made by ld. Counsel for the assessee, we would like to first go through the relevant provisions of section 147 of the Act which reads as under:

“Income escaping assessment.

147. If the ⁷³[Assessing] Officer ⁷⁴[has reason to believe ⁷⁵] that any income chargeable to tax has escaped assessment ⁷⁵ for any assessment year, he may, subject to the provisions of sections 148 to 153 , assess or reassess ⁷⁵ 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:

[Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]

Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :—

(a ) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;

(c) where an assessment has been made, but—

(i) income chargeable to tax has been under assessed ; or

(ii) such income has been assessed at too low a rate ; or

(iii) such income has been made the subject of excessive relief under this Act ; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.]

[Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.].”

15. Further, we also find that Hon’ble Courts have consistently held in plethora of decisions that in case where regular return of income has been filed u/s.139 of the Act and assessment has been completed u/s.143(3) of the Act for the very same assessment year and there is no failure on the part of the assessee to furnish material facts relating to the issues raised in the reasons recorded, then the reopening carried out after the completion of four years is bad in law and deserves to be quashed. Though the ld. Counsel for the assessee has referred to various decisions, we will take note of the two judgments of Hon’ble Jurisdictional High Court which are referred below.

15.1 Hon’ble Jurisdictional High Court in the case of Titanor Components Ltd. Vs. ACIT (2012) 20 taxmann.com 805 (Bombay) dealing with similar issue has observed as under :

“4. According to the learned counsel, the Revenue is entitled to issue such a notice if the AO has reason to believe that income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee (a) to make a return under s. 139 or (b) in response to a notice issued under sub-s. (1) of s. 142 or s. 148 or (c) to disclose fully and truly all material facts necessary for that assessment year. Since the first two conditions are not pleaded by the respondents, it is the submission of the petitioner that the notice is wholly unwarranted and invalid since there is no allegation whatsoever that the petitioner has failed to disclose all material facts necessary for assessment. This submission can be considered only with reference to the reasons put forth by the respondents for issuing the notice. The letter dt. 27th Jan., 2005, inter alia, states that the AO has reasons to believe that income has escaped assessment because the petitioner has wrongly claimed deduction under s. 80-IA in respect of income which was not derived from the income of the petitioner’s unit of Kundaim. Further, that long-term capital gains have been wrongly claimed by the assessee which have been wrongly considered for the set off of the unit of Kundaim which has resulted in escapement of income. Nowhere has the AO stated that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Having regard to the purpose of the section, we are of the view that the power conferred by s. 147 does not provide a fresh opportunity to the AO to correct an incorrect assessment made earlier unless the mistake in the assessment so made is the result of a failure of the assessee to fully and truly disclose all material facts necessary for assessment. Indeed, where the assessee has fully disclosed all the material facts, it is not open for the AO to reopen the assessment on the ground that there is a mistake in assessment. Moreover, it is necessary for the AO to first observe whether there is a failure to disclose fully and truly all material facts necessary for assessment and having observed that there is such a failure to proceed under s. 147. It must follow that where the AO does not record such a failure he would not be entitled to proceed under s. 147. As observed earlier, the AO has not recorded the failure on the part of the petitioner to fully and truly disclose all material facts necessary for the asst. yr. 1997­98. What is recorded is that the petitioner has wrongly claimed certain deductions which he was not entitled to. There is a well known difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the AO would be entitled to proceed under s. 147. We are supported in this view by a decision of a Division Bench of this Court in Hindustan Lever Lid. v. R.B. Wadkar, Asstt. CIT [2004] 190 CTR (Bom) 166: [2004] 268 ITR 332 (Bom) where in a similar case the Division Bench held that reason that there was a failure to disclose fully and truly that all material facts must be read as recorded by the AO and it would not be permissible to delete or add to those reasons and that the AO must be able to justify the same based on material record. The Division Bench observed as follows:

“He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence.”

5. We find in the circumstances that the impugned notice is not sustainable and is liable to be quashed and set aside.

Accordingly, the writ petition is allowed in terms of prayer cls. (a) and (c).”

15.2 Hon’ble Jurisdictional High Court in the case of Crompton Greaves Ltd. Vs. ACIT (2015) 55 taxmann.com 59 (Bombay) dealing with similar issue has observed as under :

“6. In order to evaluate the rival contentions, it is necessary to advert to the relevant statutory provisions contained in Section 147(1) of the Act and the first proviso there to:

“147. If the [Assessing] Officer [has reason to believe) that any income 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 (hereinafter 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. From the aforesaid, it is clear that where the assessment under sub section (3) of Section 143 of the Act has been made for the relevant assessment year, no action can be taken under Section 147 of the Act 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 assessment for that assessment year.

8. In the present case, there is no dispute that the impugned notice dated 29 March 2012 seeking to reopen assessment has been issued after the expiry of four years from the end of the relevant assessment year i.e. 1999-00. Accordingly, there is no dispute whatsoever that the proviso to Section 147 of the Act is clearly attracted. The jurisdictional issue with which we are concerned is whether there was any failure on the part of the petitioner to disclose fully and truly all the material facts necessary for his assessment in the assessment year 1999-00.

9. The aforesaid issue shall have to be considered, in the context of the reasons supplied by the respondents for the issuance of impugned notice dated 29 March 2006. The reasons, which came to be supplied only on 16 November 2006, read thus:

“On perusal of the case record, it is seen that the assessee while computing the book profit deducted the loss suffered by an industrial unit amalgamated with the assessee company, in the previous year relevant to the assessment year 1997-98. According to assessee’s own statement the accounts of the loss making company was being published separately even after its amalgamation. According to the MAT provisions the amount of profit of a sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the company has become a sick industrial company and ending with the assessment year during which the entire net worth of such company has become equal to or exceeds the accumulated losses can only be claimed as deduction for computing the book loss. The net profit for this purpose is to be adopted from the certified profit and loss account and then deduct the business loss or deprecation which ever is less and as such the assessee has reduced the book profit by Rs.5,30,52,654/- instead of Rs.1,60,00,000/-, Further it is observed that there was no book loss to be adjusted from the net profit as per the certified accounts of the assessee company. Hence the deduction of loss of the sick industrial unit from the profit of the assessee company was not in order as the assessee company was not a sick company. By doing so, the assessee has under stated its income amounting to Rs.1,11,15,796/- under the book profit u/s.115JA of the IT Act.

Further it is seen that the assessee were debiting capital expenditure of various types such as loss on sale of assets, etc. which were inadmissible as per the normal provisions of the act and were added back for computing the income under the normal provisions of the Act. By debiting such excessive and inadmissible capital expenditure to the profit and loss accounts, the assessees succeeded in declaring less net profit and there by less book profits. By doing so,the assessee has under stated its income under the book profit u/s 115JA of the IT Act.

By doing so, the assessee understated the income under the book profit u/s 115JA of the IT Act to the above extent. I am, therefore, satisfied that this is a fit case to be re-opened u/s. 147 of the IT Act, 1961. Since, assessment u/s. 143(3) has been completed and a period of four years from the end of the relevant assessment year has lapsed, hence, the case needs to be approved by the Commissioner of Income tax, City-6, Mumbai under the provisions of section 151(1) of the I.T. Act, 1961. Therefore, the case is submitted for approval so that notice u/s. 148 of the IT Act may be issued.”

9. It is significant to note that neither the impugned notice dated 29 March 2006 nor the reasons supplied in support thereof specifically state that there was any failure on the part of the petitioner to disclose fully and truly all the material facts necessary for its assessment for the relevant assessment year. No doubt, Mr. Suresh Kumar is right in his submission that the mere failure to incant the words or phrases employed in the statute with regard to failure to disclose fully and truly all material facts, is not necessarily fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. However, this is subject to the rider that there must be cogent and clear indication in the reasons supplied, that in fact there was failure on the part of the Assessee to disclose fully and truly all the material facts necessary for its assessment. If the factum of failure to disclose can be culled down from the reasons in support of the notice seeking to reopen assessment, then the mere failure to repeat words or phrases of the statute is certainly not fatal to the assumption of jurisdiction. However, if from the reasons, no case of failure to disclose is made out, then certainly the assumption of jurisdiction under Sections 147 and 148 of the Act would be ultra vires, being in excess of the jurisdictional restraints imposed by the first proviso to Section 147 of the Act.

10. Further, as has been held by this Court in the case of Hindustan Lever Ltd. v. R. B. Wadkar, [2004] 268 ITR 332/137 Taxman 479 it is necessary whilst supplying the reasons for the issuance of notices under Sections 147 and 148 of the Act to communicate as to which fact or material was not disclosed by the Assessee fully and truly, that has resulted in the income escaping assessment. It is for the Assessing Officer to disclose and open his mind through the reasons recorded by him. The reasons so recorded must be clear and unambiguous and not suffer from any vagueness. Reasons recorded should be self explanatory and should not keep the Assessee guessing as to the facts or materials, which he may not have fully or truly disclosed for the purposes of assessment of his income. In fact the record of reasons and their disclosure is a vital safeguard against arbitrary reopening of concluded assessment. The reasons so recorded and disclosed, cannot even be supplemented by filing affidavits or making oral submissions.

11. In the context of the reasons recorded, it is to be noted that in the present case apart from there being no allegation therein that there was any failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment, even otherwise, the reasons as recorded give no clue whatsoever as to the alleged failure on the part of the petitioner in disclosing fully and truly, the material facts necessary for its assessment. The reasons as recorded, in any case, do not disclose any particular fact or material that was allegedly not disclosed by the petitioner during the regular assessment proceedings under Section 143(3) of the Act. Clearly, therefore, the jurisdictional parameter, for invoking the provisions of Section 147 of the Act is absent, in the present case on both the grounds mentioned in the reasons in support of the impugned notice. In fact, in the revised return of income filed by the petitioner on 31 March 2000 along with the profit and loss account are perused, it is evident that full and true disclosures were indeed made by the petitioner, in the matter of determination of MAT liability under Section 115JA of the Act with regard to the loss of PPGM and also debiting of capital loss to its profit and loss account. Further, the Assessing Officer, in the assessment order dated 21 March 2002 under Section 143(3) of the Act in regular proceedings has specifically considered disclosures in respect of loss of PPGML made by the petitioner. Such consideration is reflected in the assessment order itself, the relevant portion of which, reads thus:

“Note 1: The assessee Company has filed a revised return of income wherein it has been stated that, “as per Sec. 115JA MAT will be payable when total income as computed under the Act is less than 30% of its book profits. In our case the adjusted total (PPGML + CGL) Book profits calculated as per the provisions of the Act is a loss. But in the both returns of income we have ignored the loss of PPGML, inadvertently. We request your honour to consider this mistake while calculating the MAT liability”. This submission of the assessee Company has been considered.” [Emphasis supplied)

13. From the aforesaid, it is apparent that not only was there no failure on the part of the petitioner to disclose fully and truly all the material facts in relation to the determination of MAT liability under Section 115JA of the Act, but further such disclosed material facts were duly considered by the Assessing Officer in making the Assessment Order dated 21 March 2002 under Section 143(3) of the Act. The jurisdictional parameter imposed by the proviso to Section 147 in matter of reopening of assessment was, thus, clearly not fulfilled. The issuance of impugned notice and the consequent assessment order is therefore in excess of jurisdictional restraint imposed upon the Assessing Officer by the proviso to Section 147 of the Act. The impugned notice dated 29 March 2006 and the second reassessment order dated 26 December 2006 are therefore liable to be quashed on this ground alone.”

16. Now in light of the above judicial precedents as well as the provisions of section 147 of the Act, we will now move on to examine the contents of reasons recorded and further to examine whether there has been any failure on the part of the assessee to disclose fully and truly all material facts relating to the issues raised in the reasons recorded. Admittedly, assessee has filed regular return of income on 30.09.2011 declaring loss of Rs.10.99 crore approx. which has been further revised on 22.03.2012 declaring the same amount of loss at Rs.10.99 crore approx. and the regular assessment proceedings u/s.143(3) of the Act concluded on 20.03.2014.

17. In the reasons recorded (referred supra), ld. Assessing Officer has referred to the transaction of issue of 1,95,589 Equity shares of face value of Rs.10/- each at a premium of Rs.1,584/-per share to three parties namely Ambit Pragma Fund Scheme-I at Rs.5,85,41,244/-, Rainbow Ventures Limited, Mauritius at Rs.24,18,57,910/- and Prasanna Patwardhan at Rs.37,74,672/-. Ld. Assessing Officer thereafter has referred to the increase in the shareholder fund from Rs.19.38 crore to Rs.49.43 crore as on 31.03.2011. Reference has also been made to the earning per share of the company and there being no justification for the issue of shares at such a high premium. Apparently, in the reasons recorded, ld. Assessing Officer has not referred to any independent information or new documents which has come to the knowledge of the Assessing Officer post completion of assessment proceedings u/s.143(3) of the Act, based on which the reasons have been recorded for reopening the impugned assessment year beyond four years. All details which ld. Assessing Officer is referring in the reasons recorded are taken from the audited balance sheet of the assessee company available in the assessment records. The only doubt which has been raised is regarding the huge share premium charged by the assessee which is running into losses thereby questioning the genuineness of the transaction.

18. We find that the assessee has furnished audited financial statements placed at pages 297 to 335 of the paper book as well as the Audit report at pages 336 to 374 forming part of the paper book filed on 08.12.2025. Audit has been conducted by the Audit firm Deloitte Haskins & Sells. The information about the increase in Reserves and Surplus is apparent from the Schedule-I of the balance sheet and subsequently under the Securities Premium account the premium on issue of Class A Equity shares at Rs.30,18,92,976/- is appearing. Further, in the notes to account which are attached to the audited balance sheet, complete information has been provided for the transactions entered into with Rainbow Ventures Limited which is the holding company along with the transaction of issue of share capital including share securities premium. It therefore shows that the transaction which ld. Assessing Officer is referring in the reasons recorded, has been duly disclosed by the assessee in the audited financial statements along all the relevant information required for showing such type of transaction. All these details were very much available with the Assessing Officer during the course of assessment proceedings u/s.143(3) of the Act and the assessment has been framed u/s.143(3) of the Act without making any addition u/s.68 of the Act for the alleged share application money. We also note that ld. Assessing Officer on one hand questioning the justification in charging the huge share premium but on the other hand has made no objection for the very same share premium received from the promotor Prasanna Patwardhan, Pune and has accepted the share application money received from him. Even in the reasons recorded, ld. Assessing Officer has only drawn inference from the balance sheet of the assessee company which already stood furnished in the assessment records and apart from that there is no other new information regarding the share applicants namely Rainbow Ventures Limited and Ambit Pragma Fund Scheme-1 which could form a basis for reopening the completed assessment beyond four years. Certainly on the issue of change of opinion the tribunal has already decided against the assessee, however, for the second limb of legal argument it remains an admitted fact that ld. Assessing Officer has not referred to any other material information or document which has not been furnished by the assessee during the course of regular assessment proceedings or in the return of income filed by it. Therefore, in absence of any failure on the part of the assessee to disclose truly and fully all material facts relating to the reasons mentioned in the reasons recorded for reopening, we find that in the given case where a valid return of income with all supporting documents were filed and assessment proceeding u/s.143(3) of the Act for the veery same assessment year stands concluded, therefore the alleged reopening of assessment u/s.147 of the Act is bad in law and deserves to be quashed and for this we place reliance on the judgment of Hon’ble Bombay High Court in the case of Titanor Components Ltd. Vs. ACIT and in the case Crompton Greaves Ltd. Vs. ACIT referred (supra).

19. In the result, the impugned legal issue raised in the Cross Objection and recalled by this Tribunal in M.A.No.22/PUN/2025 dated 20.11.2025 challenging the validity of the re-assessment proceedings for A.Y. 2011-12 is hereby allowed.”

8. In light of the above decision, we now move on to examine the facts of the instant case. For the purpose of reopening, following reasons have been recorded by ld. Assessing Officer :

“01. The assessee is a Firm and filed its return of income for A.Y. 2011-12 declaring a total taxable income of Rs. 34,77,401/. The assessment u/s 143(3) of the I.T. Act was completed determining the total income at Rs. 34,77,401/-.

02. On perusal of the assessment records, the following facts are emerged:

2.1 In the case of Commissioner of Income Tax Vs. Simit P Seth the Gujarat High Court in his order dated 16th January 2013 upheld the decision of ITAT of adding 12.50% of the bogus purchase to the Income of the assessee in the case where the assessee could show that the total quality of the purchases could be correlated with the sales. Court accepted that fact that there is a case that the assessee may have purchased the goods from the some other parties in the grey market but may have recorded the purchase in the books by taking accommodation bills.

In the case of the assessee it was seen it had purchased goods form the below mentioned assessee.

The sales tax department had established that the above sellers were not selling any goods but only giving accommodation bills to various parties. This fact was also brought to the notice of the assessee by the sales tax department and the assessee had given a undertaking on 27th November, 2012 to the sale tax department that they would not take any Input tax credit on these invoices from F.Y. 2008-09 onwards.

During assessment the department was aware about the accommodation bills being taken and recorded in purchases by the assessee but accepted the contention that no disallowance is needed as the assessee could show correlation between the purchases and sales.

In the case cited above as well as in many other cases tribunals and courts have accepted the fact that the assesse do buy goods in the grey market for considerable lower cost and then to regularized these purchase obtain accommodation invoices showing much higher value giving them advantage of not only booking the purchases as well as to lower their total taxable profit in them advantage of not only booking the books. Hence the courts have accepted the fact that in such cases the assessee will be able to show correlation between purchase and sales even when the invoices are not genuine and that the such non genuine parties may have accepted cheques in lieu of accommodation entries.

It was seen that in this case that sale tax department had established the seller as Hawala dealers and had cancelled their sales tax registration. Further the department did not call for documents from any of the dealers who had given the invoice to establish the genuineness of the sellers and seeing whether the sellers had made any huge withdrawal in their bank accounts after accepting cheques and whether these sellers had filed their income tax returns. The department merely accepted the documents given by the assessee and did not make any addition.

Non disallowance of 12.5 percent of the bogus purchases as held by the tribunal and courts in various decisions has resulted in underassessment of income to the extent of Rs. 85,77,051 (Le. 12.50% of 68616409) and short levy of tax to the extent of Rs. 26,50,308/-

AO’s Comments:

(i) It is evident from the above said facts that the assessee had not fully & truly disclosed all the material of facts for its assessment for the year under consideration thereby necessitating reopening u/s 147 of the Income Tax Act, 1961.

(ii) It is true that the assessee has filed a copy of annual report, P & L a/c, balance sheet alongwith return of income where various information/material were disclosed. However, the requisite full and true disclosure of material facts for necessary for assessment has not been made as noted above. It is pertinent to mentioned here that even though the assessee has produced annual report, P & L a/c, balance sheet alongwith return of income as mentioned above, the Show requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidences could not be discovered by the AO and could have been discovered with due diligence, according provisions of explanation 1 of section 147 of the Income Tax Act, 1961.

(iii) It is pertinent to mentioned here that material facts relevant for the assessment year on the issues under consideration were not filed during the course of the assessment proceeding and the same may be embedded in annual report, audited P & L a/c, Balance sheet and books of account in such manner that it would required due diligence by the AO to extract these information. For aforesaid reasons, it is not a case of change of opinion by the AO.

04. Therefore, I have reason to believe that the assessee has not fully & truly disclosed all the material of facts and the income of Rs 85,77,051/- has escaped the assessment by reason of the failure on the part of the assessee within the meaning of Sec. 147 of the Income tax Act 1961.’

9. We further note that the assessee has raised objections to the reasons recorded stating as under :

“Nov, 19 2018
To,

The Asst. Commissioner of Income Tax,
Circle 14, Pune

Subject: Income Tax Assessment

Ref: Sri Sidhivinayak Marketing/PAN: ABGFS8797K/AY 2011-12

Sir.

We have received the reasons recorded for the issue of notice u/s 148 of Income Tax Act. The assessee has gone through the reasons recorded for reopening of the assessment and the assessee objects to the reopening of the assessment for the following reasons:

1. The primary reason for the issue of notice has been mentioned as “purchases from dealers listed in the Hawala dealers list circulated by the Sales Tax Office”. The Ld. Assessing Officer had verified the transactions at the time of the assessment as the list was available at the time of assessment. In fact specific questions were asked during the course of assessment on the same and the Ld. Assessing Officer verified the invoices, ledgers, confirmation, payments as well as stock register. Only after fully verifying the data, the assessing officer had treated the purchases as genuine and allowed the expenditure.

Thus, any reopening on the verified facts would only mean change of opinion on the matter and the same cannot be a reason for Reopening of the Assessment.

2. The proviso to Sec 147 of Income Tax Act cast exemplary burden for satisfaction that the assessment escaped only due to failure on the part of the assessee can be reopened after 4 years if the original assessment was completed u/s 143(3) of income Tax Act. The assessee had provided for all the information called for during the course of assessment. The reasons recorded for reopening of assessment do not point out at any omission or suppression of information by the assessee. The assessee had furnished all the information called for during the course of assessment and the Ld. Assessing Officer was satisfied with the information provided for or brought to his notice during the course of assessment.

Thus, there is no reason for invoking the extended time period for reopening of the assessment.

3. We request you to kindly record our objections to the reopening of assessment. We urge you to kindly drop the reassessment proceedings as these are not authorized by the provisions of the Act.

4. Any subsequent submissions in these assessment proceedings would be WITHOUT PREJUDICE to our objections on the reassessment proceedings as stated above.

If you need any further information in this regard, we would be glad to furnish you the same.

Thanking you,
For Baheti & Somani LLP
Chartered Accountants

10. Further, ld. Assessing Officer has also disposed of the objections observing as follows :

11. Now on going through the above details, firstly we notice that in the very first line of the reasons recorded, ld. Assessing Officer mentions that “on perusal of the assessment records, the following facts are emerged”. This line indicates that ld. Assessing Officer has taken the information for recording the reasons from the assessment records already available with him. In the reasons recorded, there is reference about the purchases from three parties namely Sangam Enterprises, Citybase Multitrade Pvt. Ltd. and Akshata Enterprises and as per the information available with the Sales Tax Department that the above parties were not selling goods, but only giving accommodation entries in the form of bills to various parties. In the reasons recorded, ld. Assessing Officer has only referred to the details available in the assessment records. Now to examine the contention of ld. Counsel for the assessee, we move on to deal with order sheet details filed during the course of regular assessment proceedings on 13.03.2013. Ld. Assessing Officer has observed that “Manish Somani, CA attended and submitted copy return along with financial statements, Audit report for last three years and balance details are required to be submitted on 22.03.2013. Further, the information regarding Hawala purchases have been received in this office for F.Y. 2008-09, at Rs.4,60,98,114/-. He has to produce all purchase bills along with relevant documents for verification. Details should be submitted by 18.03.2013.

12. The above observation of the Assessing Officer clearly indicates that the issue of Hawala purchase has been taken up in the regular assessment proceedings itself and assessee was asked to produce the purchase bills along with the details. We further note that on 14.03.2013 ld. Assessing Officer observed that “Manish Somani, CA attended along with Shri Rajesh Baheti, partner of M/s. Sidhivinayak Marketing (which is one of the partner of the assessee firm). He was asked to submit and export bill set with full details. Further ledger account of purchase party, copy of bank statement. He has also submitted a copy of letter written to Sales Tax Department regarding their visit for VAT verification. He has claimed that he has not claimed credit for VAT. The information/copies to be submitted by 18.03.2013. Again on 16.03.2013 details of sale, purchase, party-wise creditors etc. is asked to produce on 23.12.2013 and finally on 23.12.2013 all the details of sale, purchase etc., were submitted by the assessee. Thereafter, ld. Assessing Officer concludes the assessment proceedings accepting the returned income.

13. From going through the notings and details filed by the assessee during the course of reassessment proceedings, it remains an admitted fact that issue of Hawala purchases already stood taken up by the Assessing Officer and the details as called for were filed. Ld. Assessing Officer while accepting the book results firstly has examined that the assessee is into export sales and that the purchases from the alleged three parties consists of exempted purchases in the form of tax free goods and purchases against H form. Since the purchases have been made against H form and tax free goods, VAT/Sales Tax is required to be charged by the alleged vendors in their bills and therefore there cannot be any case of VAT/Sales Tax evasion and thus there is no loss of Revenue to the Sales Tax Department. Further the goods purchased from these parties have been exported because in the purchases made against H form the exporter party has to furnish all the details of export in that H form based on which the seller party does not charge to tax. The quantitative details of purchases were also filed and they are available on record and even specific details about the items purchased and thereafter exported are also provided.

14. Now once all these details are filed before the Assessing Officer proving that the goods purchased from the alleged three parties have been exported and payments made through banking channel it is quite possible that ld. Assessing Officer based on his wisdom has accepted that the purchases are genuine and did not made any addition for bogus purchases. Now based on very same set of facts, ld. Assessing Officer has issued notice u/s.148 of the Act on 28.03.2018 recording the reasons regarding bogus purchases from the alleged three parties. This is a clear case of “change of opinion” and ld. Assessing Officer is not allowed to reassess the assessee on the very same issue on which the assessee has already passed through regular scrutiny proceedings and has furnished the relevant details to the satisfaction of the Assessing Officer. We also take note of the recent decision of Hon’ble Jurisdictional High Court in the case of Lupin Limited (supra) where the Hon’ble Court has held that even in a case where the reopening is within four years, still, in the absence of any fresh tangible material coming to the knowledge of the Assessing Officer, reopening of the assessment only on re-examination of the very same material based on which the original assessment order was passed cannot be permitted. Hon’ble Court has further held that on the ground that some other view was possible, the Assessing Officer could not have changed his earlier opinion and, based upon such change of opinion, issued the impugned notice seeking to reopen the assessment. Hon’ble Court thus held that for all these reasons, the impugned notice and the consequential orders will have to be set aside. Case of the assessee is on much stronger footing as reopening has been carried out beyond four years and there is complete absence of any fresh tangible material coming to the knowledge of the Assessing Officer and reassessment proceedings have been carried out only on the basis of details available in the assessment records in the possession of the Assessing Officer and the details were filed by the assessee and assessment has been completed u/s.143(3) of the Act. The judicial precedents referred hereinabove squarely applies on the facts of the instant case and therefore in our considered view the reassessment proceedings are bad in law and liable to be quashed. We therefore quash the reassessment order. Legal ground raised by the assessee in Ground No.1 and Ground No.2 are allowed.

15. Since we have quashed the reassessment order on the legal issue raised by the assessee therefore we are not inclined to adjudicate on merits of the issue and pass comments as dealing with the grounds on merit would be merely academic in nature.

16. In the result, the appeal of the assessee is allowed as per terms indicated hereinabove.

Order pronounced on this 11^th day of May, 2026.