Hi Tech Power and Steel Limited Vs Central Circle (ITAT Raipur)
₹7.35 Crore Reassessment Collapses: No Disclosure Failure Recorded
Jurisdictional Defect Ends Both Appeals
The Raipur Tribunal held that a reassessment initiated beyond four years from the end of the relevant assessment year was invalid because the recorded reasons did not allege any failure by the assessee to disclose fully and truly all material facts.
The reassessment involved additions of ₹7.35 crore towards share application money. The CIT(A) had sustained ₹3.70 crore and deleted ₹3.65 crore, leading to appeals by both the assessee and the Revenue.
Once the Tribunal held the section 148 notice bad in law and the consequential reassessment void ab initio, the Revenue’s appeal became infructuous.
Unlike a decision granting relief on the strength of investor documents, this order rested on reopening jurisdiction. The merits of the disputed investments were left unadjudicated.
Original Assessment Included Specific Share-Capital Enquiry
The company filed its return for assessment year 2012-13 on 6 September 2012, declaring income of ₹2,19,45,360.
Its case was selected for scrutiny, and the original assessment under section 143(3) was completed on 30 May 2014, determining income at ₹2,24,83,203.
The difference of ₹5,37,843 concerned disallowances of certain expenditure.
Importantly, the original Assessing Officer had issued a notice under section 142(1) dated 22 January 2014, specifically seeking the names and complete addresses of persons from whom share application money or securities premium had been received, together with relevant information.
The assessee submitted that it furnished the details sought. Books of account had also been produced during the original proceedings.
Reopening Reasons Do Not Address Earlier Scrutiny
A notice under section 148 was issued on 30 March 2019 for assessment year 2012-13.
This was beyond four years from the end of that assessment year. The subsequent reassessment under section 143(3) read with section 147 was completed on 30 December 2019.
Before the Tribunal, the assessee raised additional grounds challenging the reopening on several grounds, including change of opinion, borrowed satisfaction and non-application of mind.
The Tribunal noted that the recorded reasons did not refer to the original assessment order. More decisively, they did not allege any non-disclosure of material facts by the assessee.
The Bench therefore examined compliance with the first proviso to the then-applicable section 147.
Beyond Four Years, Escapement Alone Was Insufficient
Under the provision applied by the Tribunal, where an assessment under section 143(3) had already been completed, reopening beyond four years required satisfaction of the additional statutory conditions.
In the circumstances of this case, the relevant condition was escapement arising from the assessee’s failure to disclose fully and truly all material facts necessary for assessment.
The Tribunal found that the Assessing Officer had not recorded such a failure. It also referred to the specific enquiry concerning share application money during the original scrutiny proceedings.
Accordingly, the recorded reasons did not establish the jurisdictional requirement for reopening the completed assessment beyond four years.
High Court Decisions Support Annulment
The Tribunal relied on the jurisdictional Chhattisgarh High Court’s decision in Hariom Ingots and Power (P) Ltd. v. PCIT & Ors. (2022) 444 ITR 306.
That decision required the Assessing Officer to record the relevant disclosure failure when invoking reassessment beyond four years in the applicable circumstances.
The Bench also referred to Hindustan Lever Ltd. v. R. B. Wadkar (268 ITR 332) and First Source Solutions Ltd. v. ACIT (438 ITR 139) of the Bombay High Court.
The principles discussed included the requirement that reopening reasons must identify the relevant omission and be assessed as recorded, without later supplementation.
Supporting Delhi Tribunal decisions in RMP Holding (P) Ltd. and Sumangal Techpark (P) Ltd. were also considered.
The Tribunal allowed the assessee’s additional ground challenging non-compliance with the first proviso and held the reassessment void ab initio.
Revenue’s Vivad Se Vishwas Argument Remains Undecided
The Revenue’s cross-appeal concerned the CIT(A)’s deletion of ₹3.65 crore received from Shree Sharda Tradecom Pvt. Ltd.
Its grounds challenged reliance on the investor company’s settlement under the Vivad Se Vishwas Act, 2020. The Revenue argued that such settlement was taxpayer-specific and did not automatically establish the recipient company’s entitlement to relief.
However, the Tribunal did not decide these arguments.
Since the underlying reassessment had already been invalidated, the Revenue’s grounds became infructuous. Its appeal was dismissed without adjudicating the addition’s merits.
The assessee’s appeal was formally partly allowed, with its remaining grounds left unadjudicated.
Author’s Comments
The decision demonstrates why jurisdiction should be examined before debating a substantial section 68 addition. Here, the absence of the required disclosure-failure allegation invalidated the reassessment itself.
The original questionnaire was particularly relevant: it showed that share application money and premium were subjects of an express enquiry, rather than merely figures appearing somewhere in the accounts.
The ruling concerns the pre-amendment reassessment provisions governing the 2019 notice. Its four-year analysis should therefore be applied with attention to the statutory framework involved.
It also establishes no proposition that an investor’s Vivad Se Vishwas settlement automatically protects the recipient. That issue remained open because the Revenue’s appeal failed consequentially on jurisdiction.
A disputed addition cannot survive when the reassessment carrying it is without jurisdiction.
Cases Discussed
- Hemanshu Ramniklal Shah Vs ITO, (2025) 482 ITR 138 (Guj.) (Gujarat High Court)
- Jayant Avinash Dave Vs ACIT, 2025 (1) TMI 826, dated 15.01.2025 (Bombay High Court)
- PCIT v. Haldia Petrochemicals Ltd., [2024] 164 taxmann.com 409 (SC) (Supreme Court)
- Imperial Consultants And Securities Ltd. Vs DCIT, Circle-6(1)(2), 2024 (12) TMI 1217, dated 20.12.2024 (Bombay High Court)
- PCIT Central 1 Kolkata Versus Haldia Petrochemicals Ltd., 2023 (1) TMI 1390 (Calcutta High Court)
- Hariom Ingots And Power Pvt. Ltd. Vs Principal Commissioner Of Income Tax, Raipur, 2022 (4) TMI 344 / (2022) 444 ITR 306 (Chhattisgarh High Court)
- Realization Stock & Equity Pvt. Ltd. vs. ITO, W.P.A. 5273 of 2022 (Calcutta High Court)
- PCIT-2 Vs L&T Ltd., 2019 (1) TMI 1698 (Bombay High Court)
- Marico Limited Vs ACIT 12(3)(2), 2019 (1) TMI 122 (Bombay High Court)
- ITO, Ward 16(2) vs. Tech Span India Private Ltd. & Anr., 2018 (4) TMI 1376 (Supreme Court)
- CIT v. Kelvinator of India Ltd., 2010 (1) TMI 11 (Supreme Court)
- Hindustan Lever Ltd. Vs R. B. Wadkar, 268 ITR 332 (Bombay High Court)
- First Source Solutions Ltd. v/s ACIT, 438 ITR 139 (Bombay High Court)
- RMP Holding (P) Ltd. Vs ITO, ITA No.7243/Del/2019, AY 2011-12 (ITAT Delhi)
- Sumangal Techpark (P) Ltd. Vs ITO, ITA No.3840/Del/2019, AY 2010-11 (ITAT Delhi)
- Garg Zevar Palace Pvt. Ltd. vs. ITO, ITA No.9542/Del/2019 (ITAT Delhi)
- Avanindra Nath Agrawal vs. DCIT, ITA No.128/RPR/2025 (ITAT Raipur)
- Shri Shivam Ventures Ltd. vs. ACIT, ITA No.204/RPR/2022 (ITAT Raipur)
- DCIT vs. Usha Devi Singhania, ITA Nos.269 & 270/RPR/2025 (ITAT Raipur)
- Dushyant Kumar Jain (Delhi High Court)
- CIT vs. Usha International Ltd. (Delhi High Court)
- M/s AST Pipe Pvt. Ltd. (ITAT)
FULL TEXT OF THE ORDER OF ITAT RAIPUR
These two appeals filed the Assessee and Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Raipur-3 [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2012-13 on 07.10.2025, emanating from the Assessment Order u/s 143(3) r.w.s. 147 of the Act, dated 30.12.2019.
2. Since, the issue involved in both the appeals is same, for the sake of convenience, these two appeals were heard together and are being disposed of by this common order.
3. First, we shall take up the appeal of the assessee in ITA No. 761/RPR/2025 for AY 2012-13.
4. The assessee has raised the following grounds of appeal :
“1. The order of the Learned Commissioner of Income Tax, Appeal, Raipur-3 is bad in law and facts.
2. The Learned Commissioner of Income Tax, Appeal, Raipur-3 has erred in confirming initiating of proceeding u/s 147 of the Income Tax Act, 1961.
3. The Learned Commissioner of Income Tax, Appeal, Raipur-3 has erred in confirming Share Application Money received from group company of Rs 3,70,00,000/- as unexplained cash credit u/s 68 of the Income Tax Act.
4. For that, other grounds if any would be urged at the time of the hearing.”
5. The assessee has also raised the following Additional Grounds :
“Additional Ground of Appeal No. 1:
On the facts and in the circumstances of the case, the impugned reassessment proceedings are bad in law and liable to be quashed as the same are vitiated by mere change of opinion and non-application of mind on the part of the Learned AO, inasmuch as the case of the assessee company had already been subjected to earlier assessment proceedings wherein the relevant facts and transactions were duly examined; however, while initiating the present proceedings, the Learned AO failed to consider this vital fact and do not even make reference to such earlier proceedings, thereby clearly demonstrating that the belief regarding escapement of income has been formed mechanically and without due application of mind, rendering the assumption of jurisdiction under section 147 invalid and the reassessment proceedings void ab initio.
Additional Ground of Appeal No.2:
On the facts and in the circumstances of the case, the assessment order passed u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 dated 30.12.2019 pertaining to Α.Υ 2012-13 is illegal, bad-in-law and void-ab-initio inasmuch as the reassessment proceedings initiated after the expiry of four years from the end of the relevant assessment year is barred by limitation as the mandatory precondition of recording satisfaction about any failure on the part of the assessee to disclose fully and truly any material facts in terms of first proviso to Section 147 of the Income Tax Act, 1961 by the Learned AO has not been fulfilled, consequently, the entire proceedings are bad-in-law and void-ab-initio. It is prayed that the assessment order passed u/s 143(3) r.w.s. 147 may kindly be declared as illegal, bad-in-law and void-ab-initio and consequential enhancement of Rs.3,70,00,000/- made to the total income may kindly be directed to be deleted.
Additional Ground of Appeal No. 3:
On the facts and in the circumstances of the case the reassessment proceedings initiated u/s 147 of the Income-tax Act 1961 pursuant to notice issued u/s 148 dated 30.03.2019 are illegal bad in law and void-ab-initio inasmuch as the original assessment for the year under consideration had been completed u/s 143(3) vide order dated 30.05.2014 after conducting a complete scrutiny of the relevant issues and the reassessment has been initiated without bringing on record any fresh tangible or corroborative material subsequent to the completion of the original assessment and is therefore based on a mere change of opinion on the same set of facts and documents already examined during the original assessment proceedings consequently the assumption of jurisdiction under section 147 is invalid and the reassessment proceedings deserve to be quashed.
Additional Ground of Appeal No. 4:
On the facts and in the circumstances of the case the reassessment proceedings initiated u/s 147 of the Income-tax Act 1961 are illegal bad in law and void ab initio inasmuch as the same have been initiated on the basis of borrowed satisfaction derived from information received from the Learned DDIT (Inv.)-1 Raipur without any independent application of mind by the Learned AO to the facts of the assessee’s case and therefore the formation of belief regarding escapement of income is mechanical and not in accordance with law rendering the assumption of jurisdiction under section 147 invalid and the reassessment proceedings liable to be quashed. Thus, it is most humbly prayed before your honor to kindly admit the aforesaid Additional Grounds of Appeal.”
Submission of Ld. AR for the Assessee :
6. The Ld. AR filed legal and factual paper book along with note. The relevant paragraphs of the same are as under :
“2. Facts in brief:
a. It is respectfully submitted that the assessee had filed Return of Income for the rear under consideration on 06.09.2012 declaring total Income of Rs. 2,19,45,360/- and the assessee’s case was selected for complete scrutiny and detailed questionnaires were issued with respect to the books of accounts, share capital and other issues. The assessee participated in the assessment proceedings and filed comprehensive replies explaining every query raised by the Learned A.O i.e. the then Learned Jt. Commissioner of Income Tax Range-2, Raipur. The assessment of the assessee was completed vide order passed u/s 143(3) dated 30.05.2014 by the then Learned Jt. Commissioner of Income Tax Range-2 and in this order the total income assessed was Rs. 2,24,83,203/-. The assessee filed appeal against the said original scrutiny assessment order and the copy of the said appeal order passed on 24.02.2016 is placed on Page no. 5 of the Paper Book.
b. It is further submitted that the then Learned A.O had specifically enquired about the Share Capital, Share Premium and the explanations had been accepted and no adverse inference was drawn pertaining to the aforesaid items and thus they had obtained finality in the assessment order dated 30.05.2014.
c. The Learned ACIT Circle 2(1), Raipur had issued notice u/s 148 on 30.03.2019 requiring the assessee to file its Return of Income in 30 days and the assessee had filed its Return of Income on 13.04.2019 declaring Total Income of Rs. 2,21,89,630/-. The Notice u/s 143(2) was issued on 05.07.2019. The assessment under section 143(3) r.w.s 147 was completed vide order dated 30.12.2019.
4.2 Failure of the Learned AO to consider prior completed assessment demonstrates Non-Application of Mind:
It is respectfully submitted that the Learned AO while issuing notice u/s 148 dated 30.03.2019 for the year under consideration has failed to take note of a fundamental and vital fact that the assessee’s case had already been subjected to a comprehensive scrutiny assessment completed earlier vide order dated 30.05.2014 and the reasons recorded for reopening do not even refer to or acknowledge the said completed assessment. The omission to consider such a crucial jurisdictional fact clearly demonstrates that the alleged satisfaction regarding escapement of income has been formed mechanically and without due application of mind it is a settled position of law that reopening u/s 148 is an exceptional power which can be exercised only on the basis of conscious and reasoned satisfaction founded on relevant material and failure to consider the prior completed assessment which is a decisive jurisdictional fact amounts to non-application of mind rendering the belief of escapement wholly arbitrary and unsustainable in law. Therefore the notice issued u/s 148 dated 30.03.2019 is without jurisdiction and any assessment framed pursuant thereto is liable to be quashed as the statutory requirement of independent application of mind has not been satisfied and the reopening has been carried out in a mechanical and perfunctory manner.
The assessee is placing reliance on the following judicial pronouncements:
| Sl. No. | TITLE | CITATION | AUTHORITY | Following Page No. of the LPB |
|---|---|---|---|---|
| Argument: Failure of the AO to consider prior completed assessment demonstrates Non-Application of Mind. | ||||
| 1. | Realization Stock & Equity Pvt. Ltd. vs. ITO | W.P.A. 5273 of 2022 | Hon’ble High Court of Calcutta | 2 to 4 |
| 2. | Hemanshu Ramniklal Shah vs. ITO | (2025) 482 ITR 138 (Guj.) | Hon’ble High Court of Gujarat | 5 to 17 |
| 3. | RMP Holding (P) Ltd. vs. ITO | ITA No. 7243/Del/2019 | Hon’ble ITAT Delhi Bench | 18 to 63 |
| 4. | Sumangal Techpark (P) Ltd. vs. ITO | ITA No.3840/Del/2019 | Hon’ble ITAT Delhi Bench | 64 to 85 |
| 5. | Garg Zevar Palace Pvt. Ltd. vs. ITO | ITA No. 9542/Del/2019 | Hon’ble ITAT Delhi Bench | 86 to 98 |
4.2.1 Statutory Requirement under First Proviso to Section 147:
It is respectfully submitted that an assessment completed u/s 143(3) of the Act can be reopened u/s 147 only upon strict fulfillment of the conditions precedent prescribed under the first proviso to Section 147 text whereof is placed at page no 1 of the Legal Paper Book which mandates that where reopening is sought beyond four years from the end of the relevant assessment year there must be a clear and specific satisfaction recorded by the Learned AO regarding failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
4.2.2 No Failure to Disclose Material Facts by the Assessee:
In the present case no such satisfaction has been recorded in the reasons to believe and the entire addition has been made by treating the share capital issued by the assessee company as unexplained cash credits whereas as a matter of fact the said share capital duly forms part of the audited financial statements of the assessee company which were placed on record and specifically examined by the Learned AO during the course of complete scrutiny proceedings u/s 143(3) completed vide order dated 30.05.2014 thus, all primary facts were fully and truly disclosed by the assessee and there is no allegation much less any finding regarding failure on the part of the assessee as required under the first proviso.
The assessee is placing reliance on the following judicial pronouncements:
| Sl. No. | TITLE | CITATION | AUTHORITY | Page No. of LPB |
|---|---|---|---|---|
| Argument: Where assessment stood completed u/s 143(3) and Notice u/s 148 is issued beyond 4 years from the end of the relevant AY, in the absence of any allegation of failure to disclose material facts, the reopening beyond four years is a clear jurisdictional nullity and is liable to be quashed. | ||||
| 1. | PCIT v. Haldia Petrochemicals Ltd. | [2024] 164 taxmann.com 409 (SC) | The Hon’ble Supreme Court of India | 539 – 541 |
| 2. | PCIT Central 1 Kolkata Versus Haldia Petrochemicals Ltd. | 2023 (1) TMI 1390 | The Hon’ble Calcutta High Court | 542 – 544 |
| 3. | Hariom Ingots And Power Pvt. Ltd. Vs The Principal Commissioner Of Income Tax, Raipur | 2022 (4) TMI 344 | The Hon’ble Jurisdictional High Court of Chhattisgarh | 99 to 102 |
| 4. | Jayant Avinash Dave Versus ACIT | 2025 (1) TMI 826, dated 15.01.2025 | The Hon’ble Bombay High Court | 103 to 115 |
| 5. | Imperial Consultants And Securities Ltd. Vs. DCIT, Circle-6(1)(2) | 2024 (12) TMI 1217, dated 20.12.2024 | The Hon’ble Bombay High Court | 116 to 152 |
| 6. | PCIT -2 Vs. L&T LTD | 2019 (1) TMI 1698 | The Hon’ble Bombay High Court | 153 to 154 |
| 7. | Avanindra Nath Agrawal vs. DCIT | ITA No. 128/RPR/2025 | The Hon’ble ITAT Raipur bench | 155 to 162 |
| 8. | Shri Shivam Ventures Ltd. vs. ACIT | ITA No. 204/RPR/2022 | The Hon’ble ITAT Raipur bench | 163 to 174 |
| 9. | DCIT vs. Usha Devi Singhania | ITA Nos. 269 & 270/RPR/2025 | The Hon’ble ITAT Raipur bench | 175 to 201 |
4.3.3 Absence of New Material in Reasons to Believe
The reasons to believe do not make any reference to any fresh tangible material coming into the possession of the Learned AO after completion of the original assessment proceedings during which the audited financial statements were duly placed on record thereby clearly indicating that the reassessment has been initiated on the basis of already available and examined material which amounts to reliance on stale documents. The aforementioned fact can also be verified from the copy of Learned CIT(Appeals) order passed in pursuance of Original Assessment Order on 24.02.2016, copy whereof is placed on Page No. 5 to 7 of the Paper Book.
4.3.4 Reassessment based on mere change of opinion is impermissible and vitiates jurisdiction u/s 147:
It is respectfully submitted that the present reassessment proceedings have been initiated merely on a change of opinion, which is impermissible in law. It is well settled that reopening u/s 147/148 of the Income-tax Act, 1961 can be validly exercised only on the basis of a bona fide “reason to believe” founded on tangible material indicating escapement of income, and not on a mere reappraisal of material already on record. In the present case, the reasons recorded are mechanical, perfunctory, and devoid of independent application of mind, as no fresh tangible material, external input, or new information has come to the possession of the Learned Assessing Officer subsequent to the original scrutiny assessment. The reopening is thus based solely on the same set of facts and material already examined during the original assessment, which amounts to an impermissible review in the guise of reassessment.
It is further submitted that the assessee’s case was earlier subjected to detailed scrutiny wherein all material facts were duly disclosed and examined. In absence of any new material, the formation of belief is vitiated and cannot sustain assumption of jurisdiction u/s 147. Accordingly, the notice issued u/s 148 and the consequential reassessment proceedings are void ab initio, without jurisdiction, and liable to be quashed in entirety as being a mere change of opinion.
The assessee is placing reliance on the following judicial pronouncements:
| Sl. No. | TITLE | CITATION | AUTHORITY | PAGE NO. of LPB |
|---|---|---|---|---|
| Argument: Reassessment Initiated on Mere Change of Opinion Without Any Fresh Tangible Material is Bad in Law and Liable to be Quashed | ||||
| 1. | Marico Limited VS. ACIT 12(3)(2) | 2019 (1) TMI 122 | The Hon’ble Bombay High Court | 202 to 211 |
| 2. | ITO, Ward 16(2) vs. Tech Span India Private Ltd. & Anr. | 2018 (4) TMI 1376 | The Hon’ble Supreme Court of India | 212 to 223 |
| 3. | CIT v. Kelvinator of India Ltd. | 2010 (1) TMI 11 | The Hon’ble Supreme Court of India | 224 to 228 |
| 4. | CIT, Delhi VS. Kelvinator Of India Limited | 2002 (4) TMI 37 | The Hon’ble Delhi High Court | 229 to 248 |
4.5.1 Breakup of the addition made by the Learned AO:
It is respectfully submitted that the Learned AO observed that the assessee company received share application money of Rs. 7,35,00,000/- during the year under consideration and accordingly made the addition, breakup whereof is as under:
S. No. |
Name of Investor |
FY of Receipt |
No. of shares (a) |
Face Value per Share (b) |
Share Capital Raised (a*b) |
Security Premium per share (c) |
Security Premium Raised (a*c) |
Total Amount Raised (Share Capital + Premium) |
|---|---|---|---|---|---|---|---|---|
1 |
Shree Sharda Trade Comm. P. Ltd. (PAN: AADCS2832A) |
2011-12 |
3,85,000 |
10/- |
38,50,000/- |
90/- |
3,46,50,000/- |
3,85,00,000/- |
2 |
DKS Tradcom Pvt. Ltd. |
2011-12 |
3,50,000 |
10/- |
35,00,000/- |
90/- |
3,15,00,000/- |
3,50,00,000/- |
Total |
7,35,000 |
73,50,000/- |
6,61,50,000/- |
7,35,00,000/- |
||||
Submission of Ld. DR :
7. The Ld. DR relied on the order of the Assessing Officer (AO) and the Ld. CIT(A).
Findings and Analysis :
8. We have heard both the parties and perused the records. We will decide the legal grounds raised by the assessee in ITA No. 761/RPR/2025.
9. In this case, assessee had filed return of income electronically for AY 2012-13 on 06.09.2012 declaring total income at Rs.2,19,45,360/-. The assessee’s case was selected for scrutiny. Accordingly, various notices were issued by the Assessing Officer (AO) Joint Commissioner of Income Tax, Range-2, Raipur. Finally, the assessment order was passed by Joint Commissioner of Income Tax, Range-2, Raipur on 30.05.2014 u/s 143(3) of the Act assessing the income of the assessee at Rs.2,24,83,203/- with addition of Rs.5,37,843/- which were disallowances of certain expenditures.
9.1 Then, notice u/s 148 of the Act was issued on 30.03.2019 for AY 2012-13. The reasons recorded for issuing the notice u/s 148 of the Act, which have been reproduced in the assessment order are as under :
“Credible information has been received from DDIT (Inv) – 1, Raipur. It was observed that assessee company has received share premium from two in house investment Kolkata based Private Limited companies (at face value of Rs. 10 and premium of Rs. 90), details of which are as under:
Sr. No. |
Name and PAN of allottee |
address |
Date of allotment of shares |
No of shares allotted |
Share capital |
Share premium |
Total amount received |
|---|---|---|---|---|---|---|---|
1 |
Shree Sharda Trade comm. P. LtdAADCS 2832A |
161/1, M.G. Road, Room No-40, Kolkata 700 007. |
31.03.2012 |
3,85,000 |
38,50,000 |
3,46,50,000 |
3,85,00,000 |
2 |
DKS Tradcom P. Ltd |
161/1, M.G. Road, Room No-40, Kolkata 700 007 |
31.03.2012 |
3,50,000 |
35,00,000 |
3,15,00,000 |
3,50,00,000 |
7,35,000 |
Total |
7,35,00,000 |
|||||
From the return of income filed by both the companies for A.Y 2012-13, it is seen that share premium was raised by allotting its shares to number of Kolkata based private limited companies and almost equal amount showing as investment in unlisted equity i.e private limited companies, the source of which was share capital / premium raised by issuing shares to different Kolkata based private limited companies.
On verification of, it is seen that all the companies who have made investment in the assessee company are in-house company of group, based in Kolkata. The following were observed:
1. Return income appears to have been negligible, in most of the allottee companies.
2. There was hardly any reserve and surplus appearing in the accounts filed with return.
3. There was no business activity in these purchaser companies.
4. Capital is insufficient to purchase the shares.
5. There was no credit appeared in the P & L account.
6. There was no loans either secured or unsecured appeared to have been taken by these purchaser companies.
From the above, it is clear that all the allottee companies are Shell companies do not have any business activities. Therefore, creditworthiness of the share allottee companies of DKS Tradecom P. Ltd and Shree Sharda Trade com. P Ltd is not established. Further, information has been received that investment has been received by these 2 companies from a number of Kolkata based shell companies, the controller of which is Shri M.L.Nangalia who is well established entry operator of Kolkata.
Preliminary verifications made have shown that DKS Tradecom P. Ltd and Shree Sharda Trade com. P Ltd, both have nominal paid-up capital, high reserves and surplus on account of receipt of huge shares premium, no dividend income, private companies as majority shareholders, low turnover and operating income, nominal expenses and minimum fixed assets, which are all key elements of shell companies.
On the basis of above discussion and on perusal of records available with this office, including Income Tax Returns, Audit Report, 360 degree profiles, I have reason to believe that the amount of at least Rs.7,35,00,000/- chargeable to tax has escaped assessment for A.Y 2012-13 within the meaning of Explanation 2(b) of Section 147 of the Income-tax Act,1961”
9.2 In this case, in the reasons recorded for reopening nowhere the AO has referred to the original assessment order. Nowhere in the reasons recorded the AO has alleged any non-disclosure of material by the assessee.
10. Section 147 of the Act is reproduced here as under :
“Income escaping assessment.
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:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Provided also 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 ;
(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;
(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;
(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;
(d) where a person is found to have any asset (including financial interest in any entity) located outside India.”
(emphasis supplied)
10.1 Thus, as per proviso to section 147 of the Act, no notice u/s 148 shall be issued after 4 years from the end of the relevant assessment year where assessment order u/s 143(3) has been passed unless assessee has failed to disclose fully and truly all material facts necessary for his assessment.
11. In this case, admittedly, assessment order for AY 2012-13 was passed u/s 143(3) on 30.05.2014. Notice u/s 148 has been issued on 30.03.2019, meaning after expiry of 4 years from the end of the assessment year. Therefore, as per section 147 proviso, no notice u/s 148 could have been issued unless assessee had failed to disclose fully & truly all material facts. We have already reproduced the reasons recorded. In the reasons recorded nowhere the AO has alleged that assessee had failed to disclose all material facts. Rather, during original assessment proceedings vide notice u/s 142(1) dated 22.01.2014, the AO Jt. CIT, Range-2, Raipur had specifically asked following questions:
“Please furnish name & complete address of the persons from whom share application money/security premium amount was received. Please furnish the relevant information also.”
12. The Ld. AR submitted that all details were filed regarding share application money in response to notice u/s 142(1) dated 22.01.2014, during original assessment proceedings. Rather, during original assessment proceedings books of account were produced. Thus, the AO has failed to bring on record in the reasons recorded that assessee has failed to disclose fully and truly all material facts regarding investments during original assessment proceedings.
13. The Hon’ble High Court of Chhatisgarh in the case of Hariom Ingots and Power (P) Ltd. Vs. Principal Commissioner of Income Tax & Ors., (2022) 444 ITR 306 (Chattisgarh) has held as under :
Quote, “6………..Proceedings of reassessment has been initiated against company after lapse of 4 years of submission of return, which is not in dispute. Under first proviso to Section 147 of the I.T. Act, for starting the reassessment proceedings after lapse of 4 years, Assessing Officer has to record his conclusion that there was failure on the part of assessee in not disclosing fully and truly all material facts necessary for assessment of that particular assessment year, which is not appearing from the reading of the Annexure i.e. reasons for issuance of notice.
7. Considering the aforementioned facts and circumstances of the case, reason assigned for issuance of notice and provisions mentioned therein, in the opinion of this Court, there was no reason/ground available with Assessing Officer to issue notice under Section 148 of the I.T. Act. Issuance of notice under Section 148 of the I.T. Act to petitioner is not in accordance with the first proviso to Section 147 of the I.T. Act, therefore, it is not sustainable, which is liable to be quashed and it is hereby quashed.” Unquote.
14. The Hon’ble Bombay High Court has held in the case of Hindustan Lever Ltd. Vs R B Wadkar, 268 ITR 332 (Bombay) has held as under:
Quote, “20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. 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 vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.
21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside.” Unquote.
15. The Hon’ble Bombay High Court in the case of First Source Solutions Ltd. v/s ACIT, 438 ITR 139 (Bom) has held as under:
Quote, “11. Therefore, when the assessment is sought to be reopened after the expiry of period of four years from the end of the relevant year, the proviso to section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. This stipulation does not govern a notice for reopening within a period of four years. In the case at hand, as noted earlier, there is not even a whisper about what fact was not disclosed. In our view, therefore, the notice to reopen under section 148 of the said Act itself was issued without jurisdiction. Consequently, the order passed also cannot be sustained.” Unquote.
16. The ITAT, Delhi in the case of RMP Holding (P) Ltd. Vs. ITO in ITA No.7243/Del/2019 for AY 2011-12 has held as under :
“Quote, “39. The various other decisions relied on by the ld. Counsel also support his case to the proposition that where there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 after a period of four years from the end of the relevant assessment year in a case where original assessment has been framed u/s 143(3) of the Act is illegal and invalid since proceedings are without jurisdiction.” Unquote.
17. ITAT, Delhi in the case of Sumangal Techpark (P) Ltd. VS. ITO in ITA No. 3840/Del/2019 for AY 2010-11 has held as under :
Quote, “13. From the above, it is clear that there is no observation or allegation by the AO that there was failure on the part of the assessee in disclosing fully and truly all material facts relevant for its assessment during the original assessment proceedings. Now, we proceed to adjudicate the legal ground of the assessee in this regard.
14. On careful consideration of the rival submissions, we are of the view that the ld. Sr. DR has not controverted some undisputable facts that the original assessment proceedings were completed u/s 143(3) of the Act and scrutiny assessment order was passed on 30.11.2012 for AY 2011-12. It is also not in dispute that the AO initiated reassessment proceedings u/s 147 by issuing notice by recording reasons and issuing notice u/s 148 of the Act on 26.03.2017 i.e., beyond four years from the end of relevant assessment year. Therefore, as per requirement of mandatory provisions i.e., proviso to section 147, the AO is required to make specific allegation to identify the particular facts not fully and truly disclosed by the assessee and compliance of the said mandatory provision solely depends on verification of facts/material disclosed by the assessee in the course of assessment proceedings and from perusal of the reasons recorded. In a case the AO did not disclose anything on the evidences furnished during the original assessment proceedings and failed to identify the particular facts or material which were not fully and truly disclosed by the assessee, then, the initiation of reassessment proceedings beyond the period of four years from end of relevant assessment year has to be held as void ab initio and bad in law as per various judgements including the judgement of the Hon’ble jurisdictional High Court of Delhi in the case of Dushyant Kumar Jain (supra) and in the case of CIT vs. Usha International Ltd. (supra). Our conclusion also gets support from the judgement of the coordinate Bench of the ITAT in the case of M/s AST Pipe Pvt. Ltd. (supra) as there is no allegation by the AO in the relevant and concluding part of the reasons recorded available at page 15 of the reasons. Therefore, we conclude that the initiation of reassessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act is void ab initio and bad in law being initiated without complying with the mandatory provisions of first proviso to section 147 of the Act.” Unquote.
18. In the case of the assessee, the AO has not alleged any failure on the part of the assessee to disclose fully and truly all material facts. Admittedly, notice u/s 148 has been issued after a lapse of 4 years from the end of the assessment year. Therefore, the proviso to section 147 has not been complied. Therefore, respectfully following the Hon’ble Jurisdictional High Court, Hon’ble Bombay High Court, ITAT (supra), we hold that notice u/s 148 is bad in law. In the result, the consequential assessment order is void-ab-initio. Accordingly, Additional Ground No.2 raised by the assessee is allowed.
19. Since, we have held that notice u/s 148 is bad in law, all other grounds raised by the assessee are dismissed as un-adjudicated.
20. In the result, the appeal of the assessee in ITA No. 761/RPR/2025 is partly allowed.
ITA No. 806/RPR/2025, filed by the Revenue
21. The Revenue has raised the following grounds of appeal :
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,65,00,000/- made by the AO on account of unexplained credit from investor company M/s Shree Sharda Tradecom Pvt. Ltd.?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting relief to the assessee by placing reliance on the settlement of tax arrears by investor company under the Vivad Se Vishwas Act, 2020, ignoring that:
(a) the said settlement is assessee-specific, does not constitute adjudication on merits, and does not confer any automatic or consequential benefit upon the present assessee?
(b) it is clarified that making a declaration under the VSV Scheme shall not amount to conceding the tax position, and neither party (assessee nor Revenue) can contend that the other has acquiesced in its decision on the disputed issue by virtue of settlement?
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,65,00,000/- made by the AO on account of unexplained credit from investor company M/s Shree Sharda Tradecom Pvt. Ltd. despite the fact that the Ld. CIT(A) itself has categorically accepted and concluded that the assessee has introduced its unaccounted income through a structured arrangement in the form of accommodation entries and thus, addition made by the AO u/s 68 is warranted?
4. Any other ground that may be raised during the course of appellate proceeding.”
22. In this case, in ITA No. 806/RPR/2025, the Revenue has raised ground related to addition of Rs.3,65,00,000/-. However, in ITA No. 761/RPR/2025 for AY 2012-13, we have already held that notice u/s 148 is bad in law and consequential reassessment order is void-ab-initio. Since, we have held that notice u/s 148 is bad in law, the grounds raised by the Revenue becomes infructuous. Accordingly, Revenue’s appeal is dismissed as infructuous without adjudicating merits of the addition.
23. To sum up, the appeal filed by the assessee in ITA No. 761/RPR/2025 is partly allowed and the appeal by the Revenue in ITA No. 806/RPR/2025 is dismissed.
Order pronounced in the open Court on 6th October, 2026
