Mahak Doshi Vs ITO (ITAT Kolkata)
DGIT (Inv.) Info Alone Not Enough- Borrowed Satisfaction on Penny Stock Info Invalid: Cryptic Reasons, No Application of Mind—Notice u/s 148 Set Aside by ITAT Kolkata
Kolkata ITAT ‘SMC’ Bench in Mahak Doshi (L/H of Aditya Doshi) vs ITO (ITA No.2075/Kol/2025, AY 2011-12, order dated 23-12-2025) quashed the reassessment proceedings in entirety, holding that the reopening was based purely on borrowed satisfaction and vague, cryptic reasons without independent application of mind.
The assessee had originally filed return declaring income of ₹10.82 lakh. Reopening u/s 147 was initiated on the basis of information from DGIT (Investigation) alleging that the assessee had shown bogus STCL/LTCG/business loss of ₹11.65 lakh through penny stock (JMD Tele Film). Notice u/s 148 was issued on 29-03-2018 and assessment was completed thereafter. CIT(A), NFAC upheld the reopening.
ITAT examined the reasons recorded and found them to be entirely mechanical. The AO merely reproduced the investigation wing’s allegation and straightaway concluded escapement of income without conducting any preliminary enquiry or demonstrating a live link between material and belief. Tribunal noted that the AO did not even specify whether the alleged escapement pertained to STCL, LTCG or business loss, rendering the reasons vague, non-specific and legally unsustainable.
Relying on binding precedents including PCIT vs Meenakshi Overseas (Del HC), SFIL Stock Broking (Del HC), Sarthak Securities (Del HC), Shodiman Investments (Bom HC) and GRD Commodities (Cal HC), ITAT held that such reopening amounts to borrowed satisfaction and is void ab initio. Consequently, both the notice u/s 148 and the reassessment order were quashed, without examining the merits of the additions.
Key takeaway:
Reopening cannot rest on investigation wing inputs alone. Reasons must show independent application of mind and a clear live nexus with alleged escapement. Cryptic, vague and borrowed reasons invalidate the entire reassessment at the threshold.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
