Reopening on “Cash Loan”, Addition for “Bogus LTCG” – Ahmedabad ITAT Quashes Reassessment U/s 147

Dinaben Navinchandra Patel Vs ITO (ITAT Ahmedabad)

Reopening on “Cash Loan”, Addition for “Bogus LTCG” — AO Cannot Change the Pitch After Starting the Match: Ahmedabad ITAT Quashes Reassessment u/s 147

Summary: The Ahmedabad ITAT dealt with an interesting reassessment where the reason recorded for reopening & the addition ultimately made travelled on entirely different tracks. The Tribunal held that where the AO reopened the assessment alleging an unaccounted cash loan, but ultimately made no addition whatsoever for such cash loan & instead taxed alleged bogus LTCG, the very foundation of reassessment disappeared. Consequently, the reassessment u/s 147 was held bad in law.

Facts — ₹4.27 Crore Appeared Twice, but in Two Different Avatars

The case was reopened on the basis of information available on the Insight Portal. The reasons recorded by the AO stated that the Assessee was one of the beneficiaries who had allegedly taken an unaccounted cash loan of ₹4,26,94,390. Accordingly, notice u/s 148 dated 30.03.2021 was issued.

Interestingly, during reassessment proceedings, the AO did not make any addition for the alleged cash loan. Instead, the very same amount of ₹4,26,94,390 was treated as bogus LTCG arising from transactions in shares of Kushal Ltd. & added u/s 68 r.w.s. 115BBE.

The CIT(A) upheld both the reopening & the addition. The Assessee therefore approached the ITAT.

Assessee’s Case — Reasons Recorded Cannot Be Rewritten Later

The Assessee contended that the jurisdiction assumed u/s 147 itself was defective. The recorded reason was an alleged cash loan, whereas no such transaction was ultimately found or added by the AO. The sole addition was instead for alleged bogus LTCG, an issue which did not even find mention in the reasons recorded.

There was another striking feature. The reasons referred to a survey at the premises of M/s HOF Furniture & Systems Pvt. Ltd. & an Excel sheet allegedly showing cash payments of ₹84.42 lakh during June & July 2019. However, according to the Assessee, no transaction flowing from this information was even investigated during the reassessment. It was therefore argued that the reasons suffered from wrong factual premises & non-application of mind by the AO.

On merits, the Assessee produced contract notes, bills, demat records, BSE/ISIN details, ledger accounts, ECS receipts & evidence of STT payment. It was also contended that the Assessee was a regular investor & had no connection with Kushal Group, its directors or any entry operator. Further, the SEBI proceedings relied upon by the AO related to transactions during an earlier period & were argued to be irrelevant for AY 2017-18.

Revenue’s Argument — Income Escaped; Description Should Not Matter

The Revenue argued that the amount mentioned in the reasons & the amount ultimately added were identical. According to the Department, the essential requirement for reopening was prima facie satisfaction regarding escapement of income. It further argued that the Investigation Wing material demonstrated price manipulation & accommodation entries & that documents such as contract notes, demat statements, bank statements & STT payments by themselves could not establish genuineness.

ITAT — Same Amount Does Not Mean Same Reason

The Tribunal examined the reasons recorded & noticed the fundamental defect. The Assessee had specifically been described as a beneficiary of a “cash loan” of ₹4.26 crore. Yet, no addition was ultimately made on account of any cash loan. Instead, the addition was made on an altogether different issue — alleged bogus LTCG.

The Tribunal relied heavily upon the jurisdictional Gujarat High Court decision in CIT-II v. Mohammad Junaid (2013) 30 taxmann.com 1 (Guj.), which in turn followed CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236. Reference was also made to Ranbaxy Laboratories Ltd. v. CIT (2011) 336 ITR 136 (Delhi). The principle emerging from these decisions is that where no addition survives on the very ground for which assessment was reopened, the AO cannot sustain reassessment merely by making an addition on some other issue.

The Gujarat High Court principle is particularly important: although the AO may assess another income which comes to his notice during valid reassessment proceedings, the original jurisdictional foundation must survive. If the very reason which triggered reopening fails, the AO cannot use reassessment as a vehicle to assess some completely different income.

Explanation 3 to s.147 Does Not Rescue a Failed Reopening

The Tribunal also reproduced the Gujarat HC discussion concerning Explanation 3 to s.147. Explanation 3 permits the AO, during reassessment, to assess another escaped income even though that issue was not mentioned in the original recorded reasons.

But there is an important distinction. Explanation 3 permits additional issues in an otherwise valid reassessment; it does not keep alive reassessment where the very foundation on which jurisdiction was assumed has collapsed. The Gujarat HC had specifically held that Explanation 3 does not expand the basic jurisdiction of the AO u/s 147.

Final Verdict — Reopening Quashed; LTCG Merits Left Open

Applying the jurisdictional High Court judgment, the ITAT held that since the AO had not made the addition mentioned in the recorded reasons — namely the alleged cash loan — he could not make an addition on another issue of bogus LTCG.

More importantly, the Tribunal observed that describing the transaction as “cash loan” instead of LTCG was not merely an innocent error. It demonstrated that the reasons had been recorded mechanically & without proper application of mind.

Accordingly, the Assessee succeeded on the jurisdictional ground & the reopening u/s 147 was quashed. Once reassessment itself failed, the Tribunal considered the controversy regarding genuineness of the ₹4.26 crore LTCG academic & infructuous & therefore did not adjudicate the merits. The Assessee’s appeal was allowed.

Takeaway: The AO may discover another escaped income during a valid reassessment, but reassessment cannot become a fishing licence. If the income for which the door was opened itself disappears, the AO cannot keep the door open merely because he found something else inside.

Cases Discussed

• CIT-II vs. Mohammad Junaid — Gujarat High Court, (2013) 30 taxmann.com 1 (Gujarat).
• CIT vs. Jet Airways India Limited — Bombay High Court, (2011) 331 ITR 236.
• Ranbaxy Laboratories Ltd. vs. CIT — Delhi High Court, (2011) 336 ITR 136.
• Commissioner of Income Tax v. Atlas Cycle Industries — Punjab and Haryana High Court, 180 ITR 319.
• Travencore Cements Ltd. v. Asstt. CIT — Kerala High Court, [2008] 305 ITR 170/[2009] 179 Taxman 117.
• S.Sundaram Pilloi v. V.R. Pattabiraman — Supreme Court, AIR 1985 (SC) 582.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD

This appeal has been filed by the Assessee against the order dated 31.12.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2017-18.

2. The Assessee has raised following grounds of Appeal:-

“1.1 The order passed u/s. 250 on 31/12/2025 for AY 2017-18 by NFAC.CIT(A), Delhi (for short “CIT(A)”) upholding that the LTCG on sale of shares of Kushal Ltd., of Rs.4,26,94,390/- as bogus and accommodation entry and thereby as undisclosed income u/s.68 r.w.s. 115BBE is wholly illegal, unlawful and against the principles of natural justice.

1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant with regard to the impugned addition. The CIT(A) has passed the order just by relying upon the reasons recorded which in turn were based solely upon the DDIT information. The CIT(A) had also failed to furnish the copy of material collected during the search as relied upon for the purpose of this assessment and not allowing the opportunity of cross examination of concerned parties. Therefore, there was gross violation of principles of natural justice and such order is liable to be quashed.

1.3 The Ld. CIT(A) has grievously erred in law and or on facts in rejecting the application for additional evidence made under Rule 46A holding that there was no additional evidence.

2.1 The Ld. CIT(A) has grievously erred in law and or on facts in confirming the validity of the proceedings u/s.147 of the Act. Since the condition precedent for valid reopening u/s.147 are not satisfied, the impugned notice u/s.148 is wholly illegal and unlawful.

3.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding that the LTCG on sale of shares of Kushal Ltd., of Rs.4,26,94,390/- as bogus and accommodation entry and thereby undisclosed income u/s.68 r.w.s. 115BBE.

3.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in upholding that the LTCG on sale of shares of Kushal Ltd., of Rs.4,26,94,390/- as bogus and accommodation entry and thereby undisclosed income u/s.68r.w.s. 115BBE.

3.3 The observations made and conclusions reached by CIT(A) to confirm that the search in case of Kushal group indicated that bogus share transactions were made so as to facilitate accommodation entries by LTCG/loss and the appellant was one of the beneficiary thereof should be rejected in toto on account of the same being presumption, conjecture and irrelevant.

3.5 The observations made and conclusions reached by CIT(A) to uphold LTCG on sale shares of Kushal Limited (KL) as bogus are not admitted by the appellant and the same should be rejected in toto on account of the same being irrelevant and general in nature apart from presumption, surmise and conjecture so that they are not binding to the appellant.

It is therefore prayed that the addition of Rs.4,26,94,390/- u/s.68 made by the AO and confirmed by Ld. CIT(A) should be deleted and assessed as LTCG.”

3. Brief facts of the case are that on acting information available on the Insight portal, the Assessee is one of the beneficiaries who has taken a cash loan amounting to Rs. 4,26,94,390/- which remained unaccounted for during the year under consideration, the case of the Assessee was reopened u/s 147 of the Act by issuing notice dated 30.03.2021 u/s 148 of the Act. During the course of assessment, an addition of the same amount, i.e. Rs. 4,26,94,390/-, was made by the AO, however, the same was made on account of bogus Long Term Capital Gain (LTCG) availed by the Assessee in Kushal Group Scrip. The Assessee preferred an appeal before the Ld. CIT u/s 250 of the Act, wherein the Assessee challenged the action of the AO on the legal ground of validity u/s 147 as well as on the merits of the said addition. The Ld. CIT did not agree with the submission of the Assessee on both counts and accordingly, dismissed the appeal filed by the Assessee.

4. Aggrieved by the impugned order of the Ld. CIT(A), the Assessee is in appeal before us.

5. Ld. AR submitted that reasons for reopening in this case were the alleged cash loan amounting to Rs. 4,26,94,390/-, however, during the assessment proceedings, no such addition was made by the AO, nor was any transaction depicting such cash loan having been availed by the Assessee brought on record by the Assessing Officer. Instead, the sole addition was made by AO on account of alleged bogus LTCG availed by the Assessee which was not even mentioned in the reasons for reopening. He, therefore, submitted that the reopening in this case has been made on an incorrect premise and wrong facts, vitiating the assumption of jurisdiction by the AO u/s 147 of the Act. It was submitted that the reasons recorded in this case refers to a survey on the office premises of M/s. HOF Furniture and System Private Limited and further records that excel sheets containing details of cash payments totaling to Rs. 84,42,200/- during the months of June and July 2019 were found, however, no such transaction was even inquired by the AO during the assessment proceedings. He, therefore, submitted that reopening in this case is bad on account of wrong information contained in the reasoning as well as non-application of mind by the AO.

5.1 On the merits of the addition, Ld. AR submitted that purchases and sales in the scrip which were supported by contract notes and bills of Shah Infrastructure Home Ltd. (SIHL), demat, BSE, ISIN, and ledger accounts showing the said transactions, payments received by ECS, and the transactions made after payment of Securities Transaction Tax (STT). It was submitted that the Assessee was a regular investor in shares and securities and transactions in Kushal Group Ltd. were made year after year, out of which many remained in the stock also. It was stressed that the Assessee has no connection with Kushal Group company or any of its directors or any entry operator. It was submitted that apart from discussing the modus operandi of bogus LTCG, nothing has been brought on record by the AO which would suggest that the Assessee was in any way connected with rigging of the price of the scrips in question. It was also submitted that SEBI order in the case of Kushal Scrip pertains to the transactions carried out by several individuals between 01.08.2014 and 11.03.2015, pertains to Assessment Year 2015-16 and hence will not be anyway relevant for present Assessment Year i.e. 2017-18. Therefore the AO has misdirected himself in relying purely on the order of SEBI to make addition u/s 68 in the case of assessment.

6. Per contra, Ld. CIT-DR supported the orders of Ld. AO and Ld. CIT(A). He submitted that the amount mentioned in the reasons is the same amount of which the addition has been made by the AO, therefore, the AO at the time of recording of reasons did have concrete information regarding the escapement of income. He submitted that the benchmark for reopening assessment u/s 147 is escapement of income and at this stage, it is the prima facie satisfaction of the AO regarding escapement of income which entitles him to reopen assessment u/s 147 of the Act.

6.1 On merits, Ld. CIT-DR supported the orders of the Ld. AO and Ld. CIT(A) and submitted that the AO relied on the Investigation Wing, such findings were credible and supported by the contemporaneous seized data. He also submitted that documents viz. contract notes, demat statement, bank statements, and STT payments in the present case are not sufficient to establish genuineness of the transactions as there is overwhelming evidence of price manipulation and accommodation entries.

7. We have heard the parties and perused the materials on record. As validity of reopening is under challenge, we would like to reproduce the reasons for reopening (at page 3 and 4 of the Paper Book) appended as Annexure to approval u/s 151 of the Act. The said reasons are reproduced as under:

Brief details of the assessee: As per the details available on record/ITBA system, the assessee has not filed return of income for the A.Y. 2017-18.

2. Brief details of Information collected/ received by the AO: On perusal of the data received, it is noticed that during the course of survey at the office premises of M/s HOF Furniture and Systems Pvt Ltd situated at 117, Tulsi Complex, Nr. Mithakhali Six Road, Navrangpura, Ahmedabad was covered u/s. 133A of the I.T. Act. Statement of Sh Kushal Shah S/o Sh Anil Pranlal Shah was recorded on oath u/s. 131 of the I.T. Act. In reply to Q 5 of his statement, he deposed that his Father is handling the work of Iron and Steel Material in the name of proprietorship concern Arti Steel from this premise i.e 117, Tulsi Complex, Nr. Mithakhali Six Road, Navrangpura Ahmedabad. Further, in his reply to Q 8, he stated that he is working as an employee in Arti Steel as Accountant. He has been working since November 2012 in this proprietorship concern. There is another proprietorship concern running from this address in the name of Devansh Engineering which is in the name of his Sister Pooja Shah. The PAN of Arti Steel is ADFPS9605D. The PAN of Devansh Engineering is DKFPS4045K. He looks after the accounts of Devansh Engineering as an accountant and getting salary. Total salary from both Devnash Engineering and Arti Steel is 35000/- (Rs. Thirty Five Thousand) per Month. During the survey, Backup/imaging of the digital data contained in Laptops i.e. one of Dell Company and one HP Company found at the premises was done. On perusal of such digital data, Excel sheet containing details of cash payments totalling to Rs. 84,42,200/- during the months of June and July. 2019 was found.

In this case, information was reflected on Insight Portal. On verification of the Information, it is noticed that the assessee is one of the beneficiaries who has taken cash loan amounting to Rs. 4,26,94,300/- which is remains unaccounted for the year under consideration.

3. Basis of forming reasons to believe and details of escapement of Income:

On perusal of the detalls and information, it is very clear that the assessee is one of the beneficiaries who has taken cash loan amounting to Rs. 4.26.94.390/-which is remains unaccounted for the year under consideration. In view of the above facts, I have reason to believe that income of Rs. 4,26,94,390/- has escaped assessment within the meaning of section 147 of the Act. Therefore it is a fit case for reopening of the assessment by invoking the provision of section 147 of the I.T. Act 1961. Accordingly, it is fit case for issuing notice u/s. 148 of the I.T. Act.

4. case: Applicability of the provisions of section 147/151 to the facts of the

In view of above findings, I have reasons to believe that this is a case where income chargeable to tax has escaped assessment by an amount of Rs. 4,26,94,390 /- and it is a fit case for reopening the assessment as the income chargeable to tax has escaped within the meaning of section 147 of the Act.

It is pertinent to mention here that in this case the assessee has filed its return of income for the year under consideration and no assessment as stipulated u/s.2(40) of the Act was made. In view of the above, provision of clause (b) of explanation 2 section 147 are application to facts of the case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.

The case is within four vears from the end of the assessment year under consideration. Hence, necessary sanction. Issue notice u/s. 148 of the Act has been obtained from Addl. Commissioner of Income Tax, Range-2(1), Ahmedabad as per the provisions of section 151(2) of the Act.”

8. Part of the reasons are also recorded in the Assessment Order, as under:

“In this case, information was reflected on Insight Portal. On verification of the information, it is noticed that the assessee is one of the beneficiaries who has taken cash loan amounting to Rs. 4,26,94,390/- which is remains unaccounted for the year under consideration.”

9. A perusal of the reasons reveals that while recording reasons, the Assessee was claimed to be a beneficiary of “cash loan”. However, it is a matter of record that no addition was made by the AO on account of the Assessee being a beneficiary of “cash loan”; rather addition was made on an altogether different issue of bogus LTCG.

10. Hon’ble Jurisdictional Gujarat High Court in the case of CIT-II vs. Mohammad Junaid reported in (2013) 30 taxmann.com 1 (Gujarat) held that in case no addition was made by the Assessing Officer on the ground on which reopening of assessment was done, he cannot make addition on some other ground which did not form part of reasons recorded by him. In this case, the Hon’ble Jurisdictional Gujarat High Court has placed reliance upon the case of CIT vs. Jet Airways India Limited reported in (2011) 331 ITR 236. Reliance was also made to the decision of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT reported in (2011) 336 ITR 136 wherein similar view was taken by the Hon’ble Delhi High Court. The Hon’ble Jurisdictional Gujarat High Court thereafter held as under:

“20. We may notice that Explanation 3 to Section 147 of the Act was inserted by Finance Act 2 of 2009 w.e.f. 01.04.1989. To this aspect of the matter and the effect of the explanation itself we would advert to at a later stage.

21. Section 148 of the Act pertains to “issuance of notice where income had escaped assessment”. Subsection (1) of Section 148 pertains to the requirement of issuance of notice by the Assessing Officer before making the assessment, reassessment or recomputation of income under Section 147 of the Act. Sub-section (2) of Section 148 provides that the Assessing Officer shall before issuing any notice under the said section record his reasons for doing so.

22. Section 147 of the Act thus, gives power to the Assessing Officer for reopening an assessment. Such powers, however, are hedged with several conditions. First the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment. Further if the reopening is resorted beyond the period of four years from the end of the relevant assessment year, additional requirement that income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to make a return under Section 139 or in response to a notice under Section 142(1) or 148 of the Act or to disclose fully and truly all material facts necessary for the assessment must also be satisfied. If the requirements of giving jurisdiction to the Assessing Officer to reopen assessment are satisfied, he may 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 the said section.

23. Section 147 of the Act, even without the aid of Explanation 3 thus enabled the Assessing Officer while framing an assessment under Section 147 of the Act, to assess or reassess such income for which he had recorded his reasons to believe had escaped assessment and also any other income which escaped assessment which came to his notice subsequently in the course of the assessment proceedings.

24. Sans explanation (3), Section 147 of the Act, however, by no stretch of imagination, can be construed as to provide that if the reason on which the assessment is reopened fails, the Assessing Officer still can proceed to assess some other income which according to him had escaped assessment and which came to his light during the course of the assessment. For assuming jurisdiction to frame an assessment under Section 147 of the Act what is essential is a valid reopening of a previously closed assessment. If the very foundation of the reopening is knocked out, any further proceeding in respect to such assessment naturally would not survive.

25. A question may therefore, arise whether introduction of Explanation (3) would change this position and for that purpose we need to ascertain what is true purport of Explanation 3 and the purpose for which the same was introduced. Let us have a closer look to such Explanation which provides that for the purpose of assessment or reassessment under the said section, the Assessing Officer may assess or reassess the income in respect of any issue which escaped assessment and which comes to his notice subsequently in the course of reassessment proceedings. The explanation further provides that this would be so notwithstanding that y reasons for such issue have not been included in the reasons recorded under Section 148(2).

26. If the contention of the assessee that even after introduction of Explanation 3 to Section 147 of the Act, the situation has not undergone any material change is accepted, the question that immediately would come to one’s mind is, what then was the purpose of introducing such an explanation. An argument may arise that if before and after introduction of Explanation 3, the nature of jurisdiction exercised by the Assessing Officer was not to undergo any change, would Explanation 3 not be rendered redundant. Would such a situation not run counter to a well known legal principle that the Legislature cannot be seen to have enacted a redundant legislation and that every effort should be made to give such interpretation which ensures that a provision in a statute is not rendering otiose. Such question may have led to some interesting discussion. However, the entire issue has been put beyond any pale of controversy by virtue of the explanatory memorandum for introducing such explanation. Such explanatory memorandum reads as under:

“Clarificatory amendment in respect of reassessment Proceeding under section 147

The existing provisions of section 147 provides, inter alia, that if the Assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income after recording reasons for reopening the assessment. Further, he may also assess or reassess such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section.

Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent.

With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section 148.

This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to assessment year 1989-1990 and subsequent years.

27. From the above, it can be seen that the explanation was meant to be clarificatory in nature and to put the issue beyond any legal controversy. When the Legislature found that in face of the provisions contained in Section 147 of the Act post 01.04.1989 some of the courts had taken a view that the Assessing Officer is restricted to the reassessment proceedings only on issues in respect of which the reasons were recorded for reopening the assessment, such explanation was introduced in the statute. Thus, the explanation was meant to be merely clarificatory in nature and was introduced with the purpose of putting at rest the legal controversy regarding the true interpretation of Section 147 of the Act which had arisen on account of certain judicial pronouncements. We have noticed that prior to enactment of Explanation 3 to Section 147, Punjab and Haryana High Court in case of Commissioner of Income Tax v. Atlas Cycle Industries reported in 180 ITR 319 (supra) had taken a restricted view of the power of the Assessing Officer to make any addition on the grounds not mentioned in the reasons recorded for reopening the assessment. We may also notice that Kerela High Court in case of Travencore Cements Ltd. v. Asstt. CIT [2008] 305 ITR 170/[2009] 179 Taxman 117 had taken somewhat similar stand.

28. Explanation 3 to Section 147 of the Act thus does not in any manner, even purport to expand the powers of the Assessing Officer under Section 147 of the Act. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. In case of 5.Sundaram Pilloi v. V.R. Pattabiraman AIR 1985 (SC) 582 the Supreme Court observed that, an explanation added to a statutory provision is not a substantive provision but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. It was observed as under:

“52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is-

(a) to explain the meaning and intendment of the Act itself.

(b) where there is any obscruity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve.

(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful.

(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof hut where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment.

(e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.”

29. Above decision has been referred to and relied upon in several subsequent decisions. Above proposition being well settled, it is not necessary to refer to all such decisions.”

11. In our considered opinion, the facts of the present case are squarely covered by the aforesaid judgment of the Hon’ble Jurisdictional Gujarat High Court. Respectfully following the same, we hold that the AO having not made addition referred to in the reasons, i.e. cash loan, cannot make addition under any other issue (bogus LTCG in the present case). The mere fact that the amount in question was treated as “cash loan” in the reasons recorded instead of long-term capital gain besides being incorrect, also goes to establish that the reasons recorded by the AO were mechanical and suffer from non-application of mind u/s 147 of the Act. The Assessee therefore succeeds on the legal ground that reopening in the case was bad in law. As we decided the legal ground of reopening made u/s 147 of the Act in favour of the Assessee, the ground challenging the addition on merits has been rendered academic and infructuous and, therefore, we are not adjudicating the same.

12. In the result, the appeal filed by the Assessee is allowed.

The order pronounced on 03.09.2026.