Share Sale Examined in Original Assessment: Reopening After Four Years Quashed

Sangeeta Sharma Vs ACIT (ITAT Delhi)

Share Sale Examined in Original Assessment: Reopening After Four Years Quashed

Disclosure in the assessment record matters, even when the assessment order is brief. The Delhi Bench of the ITAT has held that an Assessing Officer cannot reopen a completed scrutiny assessment after four years merely by stating that the original order did not discuss a particular transaction. Where the assessee had furnished the relevant details during the original proceedings, the Revenue must establish a failure to disclose fully and truly all material facts before it can cross the four-year restriction in the first proviso to Section 147.

The ruling was delivered in Ms. Sangeeta Sharma v. ACIT, ITA No. 7605/Del/2025, AY 2012–13, on 28 September 2026.

The share transaction was already before the AO

The assessee had sold 7,00,000 shares of a company formerly known as Mahadev Stock Broking Company Limited and later named Hum Tum Builders Limited. The sale consideration stated before the Tribunal was ₹9.73 crore. In her return, the assessee reported a long-term capital loss after claiming the indexed cost of the shares.

The original assessment was completed under Section 143(3) on 28 January 2015, accepting the returned income. This was not a case in which the share transaction surfaced for the first time during reassessment. The original AO’s questionnaire had specifically sought details of investments, dividend income, and purchases and sales of shares. In response, the assessee furnished details of the capital loss, the acquisition and sale of the shares, share certificates, and supporting documents.

Nevertheless, the Department issued a notice under Section 148 on 31 March 2019. Relying on information from the Investigation Wing, the reopening reasons questioned the purchaser’s financial capacity and referred to cash deposits of ₹9,91,50,500 in the assessee’s bank accounts. The AO took the view that the share sale had been used to introduce unaccounted money. In the reassessment, an addition was made in respect of the deposits.

“The assessment order is silent” was the Revenue’s answer

The CIT(A) sustained the reopening. The principal reasoning was that the original assessment order did not discuss the share transaction or expressly record an opinion on it. According to the CIT(A), if the AO had formed no opinion in the original order, there could be no change of opinion when the matter was examined later.

The assessee pointed to a more fundamental restriction. The notice had been issued more than four years after the end of AY 2012–13, and the original assessment had been completed under Section 143(3). The first proviso to Section 147 therefore applied. In those circumstances, reopening required escaped income attributable to the assessee’s failure to disclose fully and truly all material facts necessary for the assessment.

The assessee argued that the recorded reasons contained no such allegation of failure. On the contrary, the documents relating to the sale had been supplied when the original AO called for them.

What the Tribunal decided

The Tribunal examined the original questionnaire, the assessee’s reply, the supporting material, and the recorded reasons for reopening. It found that the details of the share sale had been furnished in the original scrutiny proceedings. It also found that the reopening reasons did not charge the assessee with a failure to disclose fully and truly the material facts necessary for assessment.

That omission was decisive. Information from the Investigation Wing and doubts about the purchaser could not, by themselves, remove the statutory restriction applicable after four years. Nor could the AO overcome that restriction simply by saying that the original assessment order had not discussed the transaction.

The Tribunal relied on the Supreme Court’s decision in CIT v. Foramer France, (2003) 264 ITR 566, concerning the operation of the proviso to Section 147. Since the Revenue had not established the required failure on the assessee’s part, the Tribunal held the reopening to be bad in law and quashed it. Having allowed the jurisdictional ground, it did not decide whether the cash deposits were taxable on merits.

Author’s comment

The practical point is the distinction between an issue absent from the assessment order and a fact withheld from the AO. An assessee does not draft the assessment order. If a specific query was raised and the transaction was explained with documents, the AO’s decision to pass a short order cannot, by itself, be treated as the assessee’s failure to disclose.

At the same time, this ruling should be used for its precise proposition. The Tribunal did not certify the purchaser’s creditworthiness or pronounce the share sale genuine. It held that the Department’s chosen route to reassess, through a notice issued beyond four years, failed the applicable jurisdictional condition.

For practitioners, the original questionnaire, dated reply, acknowledgments, and supporting papers are therefore crucial. They show what was placed before the AO and allow the recorded reopening reasons to be tested against the first proviso to Section 147. Here, that record made the difference: the addition fell because the reassessment itself could not stand.

Cases Discussed

• CIT v. Foramer France, (2003) 264 ITR 566 (SC) — Relied upon by the Tribunal for the proposition that where an assessment under Section 143(3) has already been made and reopening is beyond four years, the statutory condition concerning failure to disclose fully and truly all material facts must be satisfied.
• Foramer France v. Commissioner of Income-tax and Another, (2001) 247 ITR 436 (Allahabad High Court) — The Tribunal reproduced the reasoning affirmed by the Supreme Court concerning the first proviso to Section 147 and reassessment beyond four years.
• CIT v. Nova Promoters & Finlease (P.) Ltd., ITA No. 342 of 2011, decided 15.02.2012 (Delhi High Court) — Cited in the recorded reasons for the proposition that, at the stage of issuing notice under Section 148, the AO is required to form a prima facie belief of escapement based on a live link with the material available.
• Jyoti Goyal v. ITO, ITA No. 1259/Del/2010 (ITAT Delhi) — Cited in the recorded reasons regarding the live link between information available to the AO and formation of belief that income had escaped assessment.
• ITO, Ward-5(2) v. Kautilya Monetary Service P. Ltd., ITA No. 4738/Del/2009 (ITAT Delhi) — Cited in the recorded reasons on reopening and change of opinion where there were no original assessment proceedings.
• Rakesh Aggarwal v. ACIT, (1997) 225 ITR 496 (Delhi High Court) — Referred to in the Foramer France extract reproduced by the Tribunal concerning the restriction on reassessment beyond four years following an original assessment under Section 143(3).
• Shree Tharad Jain Yuvak Mandal v. ITO, (2000) 242 ITR 612 (Gujarat High Court) — Referred to in the reproduced Foramer France extract as taking the same view regarding the proviso to Section 147.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is arising out of the order of learned CIT(A), Delhi-31 in appeal No.CIT(A), Delhi-10/10905/2019-20, order dated 19^th August, 2025. The reassessment was framed by the Assistant Commissioner of Income Tax, Circle-29(1), Delhi for the assessment year 2012-13 under Section 143(3) read with Section 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) vide order dated 21^st December, 2019.

2. The first issue raised by the assessee is that the assumption of jurisdiction by the Assessing Officer under Section 148 of the Act is bad in law and invalid. For this, the assessee has raised following ground Nos.2 to 5:-

“2. That on the facts and circumstances of the case and in law, the order passed by CIT(A), Delhi-31 (hereinafter referred to as CIT(A)) was not justified in sustaining the action of the AO as the notice issued u/s 148 on the matter which was already covered in original assessment.

3. That on the facts and in the circumstances of the case and in law the Ld.CIT(A) was not justified in sustaining the action of AO as the matter was squarely covered in the original assessment which was in the favour of the appellant.

4. That on the facts and in the circumstances and in law the Ld.CIT(A) was not justified in upholding the action of AO because the impugned order passed by the Ld.AO is merely a change of opinion as the documents, relevant facts and material were present before him and considered by his predecessor while passing the original assessment order.

5. That on the facts and in the circumstances and in law the Ld.CIT(A) while confirming the addition has not considered that the assessee has no role to play and is not the author of the assessment order and hence the manner and contents of the assessment order as framed is not determinative whether or not it is a case of change of opinion.”

3. Brief facts are that original assessment was completed by the ACIT, Circle-30(1), New Delhi under Section 143(3) of the Act after selecting the case for scrutiny and issuing notice under Section 143(2) of the Act. The Assessing Officer accepted the returned income after considering the submissions of the assessee and after going through the books of account of the assessee. Learned Counsel for the assessee drew our attention to the notice under Section 143(2) of the Act along with questionnaire of the Assessing Officer issued on 30^th October, 2014, wherein the Assessing Officer has required the assessee to file complete details of investments made in mutual funds and dividend income earned thereon. The Assessing Officer also required the assessee to file the details of sale and purchase of shares and assessee, vide reply dated 29^th December, 2014, filed complete details of long term capital loss on sale of shares along with supporting documents for purchase and sale of said shares. The relevant reply of the assessee is enclosed at page 7 of the assessee’s paper book and the complete details of shares are enclosed in the assessee’s paper book from pages 8 to 57. The assessee has enclosed complete details of share certificates, amount received in cheques, details of holding of M/s Mahadev Stock Broking Co. Limited as well as M/s Hum Tum Builders Limited. The assessee has sold these shares and received payment from 4^th April, 2011 to 23^rd February, 2012 i.e., amount of ₹9,73,00,000/-. All these details were filed by the assessee before the original assessment proceedings on query raised by the Assessing Officer. Accordingly, assessment was completed under Section 143(3) of the Act vide order dated 28^th January, 2015. Subsequently, notice under Section 148 of the Act dated 31^st March, 2019 was issued by the ACIT, Circle-29(1), Delhi after recording of reasons and accordingly, assessment was framed making an addition of ₹9,91,50,000/-, by observing in paragraph Nos.7.2 and 7.3 as under:-

“7.2 The shares of M/s Hum Tum Builders Limited are not listed on any stock exchange. In this regard, copy of valuation report of shares, before purchasing of shares from Mrs. Sangita Sharma has not been furnished by Sh. Rajesh Kumar. Hence, the total amount of Rs.9,91,50,500/- which was credited in cash in the bank accounts of the Assessee Smt. Sangita Sharma remains unexplained. The entire transaction has been orchestrated by the Assessee, Smt. Sangita Sharma to bring her unaccounted money into her account using Rajesh Kumar as buyer of Shares.

7.3 It is clear from the above details that Assessee didn’t disclose here Total Income correctly for purpose of Taxation. Therefore, following amount has escaped Assessment in the case of Smt. Sangita Sharma (PAN : AQMPS4577N) for the A.Y. 2012-13 (F.Y. 2011-12).”

4. Aggrieved, assessee preferred appeal before the learned CIT(A). The learned CIT(A) adjudicated the issue of reopening by observing in paragraph Nos.9 and 10 as under:-

“9. The main contention of the appellant is legal that once an assessment u/s 143(3) of the Act has been concluded and returned income accepted by the AO, he cannot reopen the assessment for that assessment year and if he does so, the same amounts to change of opinion. Citing various case laws, the appellant has pleaded that the re-assessment be declared as invalid being based on reason to believe involving change of opinion.

10. Upon careful perusal of original assessment order u/s 143(3) of the Act, it is seen that the AO has not formed any opinion on the transactions of sale/purchase of shares amounting to Rs.9,91,50,000/- concluded in cash between the appellant and one Shri Rajesh Kumar. Therefore, I am of the considered view that when no opinion on the said transaction is formed by the AO in original assessment order u/s 143(3) of the Act, there is no question of change of opinion. The case laws relied upon by the appellant are not applicable to the facts of this case and are clearly distinguishable. In this regard, following case laws are relevant which are being discussed hereunder.”

Aggrieved, now the assessee is in appeal before us.

5. We have considered the submissions of both the sides and perused the material placed before us. We noted that the original assessment was completed under Section 143(3) of the Act by the Assessing Officer vide order dated 28^th January, 2015. The relevant assessment year involved is assessment year 2012-13. At the time of original assessment proceedings, the assessee filed complete details in respect of sale of the shares of M/s Hum Tum Builders Limited i.e., 7,00,000 shares for a total consideration of ₹9,73,00,000/-. Admittedly, M/s Mahadev Stock Broking Company Limited was named as M/s Hum Tum Builders Limited and, the 7,00,000 shares of M/s Mahadev Stock Broking Company Limited became the shares of M/s Hum Tum Builders Limited. The assessee filed complete details of sale of shares which were purchased by the assessee in 1995 i.e., 21^st November, 1995. The Assessing Officer has gone into all these details and assessed the income of the assessee. Subsequently, the Assessing Officer issued notice under Section 148 of the Act dated 31^st March, 2019 and recorded the following reasons:-

 Reasons for Reopening of Assessment in case of Smt. Sangita Sharma for A.Y. 2012-13 u/s 147 of the Income Tax Act, 1961

1. The assessee Smt. Sangita Sharma, Resident of E-528, Greater Kailash Part-II, New Delhi-110 048 with PAN. AQMPS4577N.

2. In this case information was received from DDIT(Investigation), Unit-1(3), New Delhi that the Assessee Smt. Sangita Sharma had sold 7,00,000 Shares of M/s Mahadev Stock Broking Company Limited (later name changed to M/s Hum Tum Builders Ltd. and then to M/s LSL Tools Pvt.Ltd.) to Sh. Rajesh Kumar (Proprietor Cobra & Co.) at a total consideration of Rs.9,73,00,000/-. The whole amount of Rs.9,73,00,000/- was received by the Assessee in cash in FY 2011-12 as per information received from Investigation Wing.

The source of income of the Assessee Smt. Sangita Sharma for the year under consideration was rental income and agriculture income. As per computation of income for the AY 2012-13 submitted by the AR of the Assessee, income from capital gain is at Loss of Rs.4,75,801/- from sale of shares after deducting indexed cost of acquisition shares.

Assessee was asked to furnish the copy of register of members & shares transfer books of the company highlighting the purchase of shares and sale of shares. However, no compliance has been made by the assessee.

Summons was also issued to Sh. Rajesh Kumar (Prop. Cobra & Co.) to furnish:

(i) The source of Rs.9,73,00,000/- for purchasing of equity shares of M/s Hum Tum Builders Pvt.Ltd. from Mrs. Sangita Sharma in F.Y. 2011-12 and

(ii) Copy of valuation report of shares before purchasing of shares from Mrs. Sangita Sharma, if any.

However, no compliance has been made by Sh. Rajesh Kumar.

Further, to verify the creditworthiness of Sh. Rajesh Kumar, the ITRs filed by him were examined and it was seen that Sh. Rajesh Kumar appears to have not filed any return after AY 2011-12. For the earlier years wherein the returns are filed, the income declared is too low. Following is the income declaration made by Sh. Rajesh Kumar:

From the above incomes declared, it can only be held that the Sh. Rajesh Kumar doesn’t have required creditworthiness.

3. As per the submission the AR of the assessee, the source of income of the assessee was rental income and agriculture income. As per computation of income for the AY 2012-13 submitted by the AR of the assessee, income from capital gain is at loss of Rs.4,75,801/- from sale of shares after deducting indexed cost of acquisition shares.

4. The AR has claimed that the issue of sale of shares has been examined at the time of assessment u/s 143(3). However, on perusal of the assessment order u/s 143(3) of the I.T. Act, 1961 dated 28.1.2015 of Mrs. Sangita Sharma for the A.Y. 2012-13, it is found that the issue related to purchase/sale of shares has not been discussed.

5. Further, as per Submission of the assessee the summary of cash deposits in the accounts of Smt. Sangita Sharma is tabulated below:

Therefore, the total amount of Rs.9,91,50,500/- which was credited in cash in the bank accounts of the assessee Smt. Sangita Sharma remains unexplained. The entire transaction has been orchestrated by the assessee, Smt. Sangita Sharma to bring her unaccounted money into her account using Rajesh Kumar as buyer of Shares.

It is clear from the above details that assessee didn’t disclose her total income correctly for purpose of taxation. Therefore, following amount has escaped assessment in the case of Smt. Sangita Sharma (PAN : AQMPS4577N) for A.Y. 2013-14 (F.Y. 2011-12).

6. In view of the above facts and the undersigned has reason to believe that the aforementioned amount of Rs.9,91,50,500/- received in cash by Smt. Sangita Sharma from Sh. Rajesh Kumar remain unexplained. As assessment u/s 143(3) of the Income Tax Act 1961 has been made in the case of the assessee for the year under consideration but this issue was not examined in that order and as such there is no question of ‘Change of Opinion’ on part of the AO. Hence it is deemed to be a case where income chargeable to tax has escaped assessment as per the provisions stipulated in Explanation 2(c) to Section 147 of the Act.

It is further pertinent to mention here that in the case of CIT vs. Nova Promoters & Finlease (P) Ltd. (ITA No.342 of 2011) dated 15.02.2012, the Hon’ble Delhi High Court, which is the jurisdictional High Court, held that as long as there is a ‘live link’ between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held-

“We are aware of the legal position that at the stage of issuing the notice u/s 148 the merits of the matter is not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment.”

Furthermore, in the case of Jyoti Goyal vs. ITO (ITA No.1259/Del/2010), the Hon’ble ITAT Delhi held that:

“As regards the other contentions of the assessee that the reopening was more in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment. Sufficiency of such information cannot be gone into while deciding the issue of validity or reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement with the finding of the Ld. CIT(A) that the reopening of assessment u/s 147 of the Act was valid.”

Furthermore, in the case of ITO, Ward-5(2) vs. M/s Kautilya Monetary Service P.Ltd. (ITA No.4738/Del/2009), the Hon’ble ITAT, Delhi held that:

Since there were no original assessments proceeding, therefore there is no question of change of opinion of the Assessing Officer. The sufficiency of reasons is not a material fact for annulling the reassessment proceedings. The material was received from the investigation wing which prima facie. This case is beyond four years from the end of the assessment year under consideration. Hence, necessary sanction to issue the Notice u/s 148 has been obtained separately from Pr. Commissioner of Income Tax as per provisions of Section 151 of the Act.

Dated : 28.03.2019

Sd/-
(Bandana Deori)
Assistant Commissioner of Income Tax
Circle-29(1), New Delhi

6. At this point of time, the learned Counsel for the assessee stated that the reason recorded for reopening of assessment was to examine the sale of shares by the assessee and receipt of cash of ₹9,91,50,500/- in her bank accounts as narrated in the reasons recorded. The learned Counsel specifically drew our attention to paragraph No.6 of the assessment order and stated that the Assessing Officer has recorded reasons in terms of Explanation 2(c) of Section 147 of the Act whereas the assessee’s case clearly falls under the proviso to Section 147 of the Act. The learned Counsel drew our attention to the relevant proviso, which reads as under:-

“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. Learned Counsel further stated that there is no iota of charge that income chargeable to tax has escaped assessment for the relevant assessment year 2012-13 by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for her assessment for the relevant assessment year 2012-13. He drew our attention to the complete reasons which were not controverted by the learned CIT-DR. We also noted that admittedly, the assessee’s case falls under the first proviso to Section 147 of the Act for the reason that original assessment was completed under Section 143(3) of the Act and four years have elapsed from the date of issuance of notice under Section 148 of the Act. The assessee has filed complete details before the Assessing Officer during the course of original assessment proceedings and, even going by the reason recorded by the Assessing Officer for issuance of notice under Section 148 of the Act and reopening of original assessment, which is beyond four years, there is no charge levied that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for framing assessment for the relevant assessment year. Once this is the case, any reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts and assessment was completed originally under Section 143(3) of the Act are invalid and, admittedly, since the reopening is beyond four years, we are of the view that reopening is bad in law. This view of ours is supported by the decision of Hon’ble Supreme Court in the case of CIT Vs. Foramer France – (2003) 264 ITR 566 (SC), wherein the Supreme Court has affirmed the decision of Hon’ble Allahabad High Court in the case of Foramer Vs. Commissioner of Income-tax and Another – (2001) 247 ITR 436 (Allahabad), wherein it is held as under:-

“14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed.

15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows:

“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.”

16. This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147.

17. In Rakesh Aggarwal v. Asst. CIT [1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accordance with the new Section 147, and where the original assessment had been made under Section 143(3) then in view of the proviso to Section 147, the notice under section 148 would be illegal if issued more than four years after the end of the relevant assessment year. The same view was taken by the Gujarat High Court in Shree Tharad Jain Yuvak Mandal v. ITO [2000] 242 ITR 612.

18. In our opinion, we have to see the law prevailing on the date of issue of the notice under Section 148, i.e., November 20, 1998. Admittedly, by that date, the new Section 147 has come into force and, hence, in our opinion, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso.”

8. In view of above facts and circumstances, we are of the view that reopening is beyond four years and, as the original assessment was framed under Section 143(3) of the Act, and the Revenue could not establish any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening in the present case is bad in law. Hence, the reopening is quashed and the jurisdictional issue is allowed in favour of assessee. Since, we have quashed the order under Section 148 of the Act reopening the assessment, we need not adjudicate the issues on merits.

9. In the result, the appeal of the assessee is allowed.

Decision pronounced in the open Court on 28^th September, 2026.