DCIT Vs Paceman Sales Promotion Pvt. Ltd. (ITAT Kolkata)
No Addition on Original Reopening Issue: ITAT Upholds ₹63.48 Lakh Addition Under Amended Section 147
Introduction
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) allowed the Revenue’s appeal and restored the disallowance of ₹63,48,367 in share-trading loss claimed by Paceman Sales Promotion Pvt. Ltd.
The Tribunal held that under section 147, as substituted by the Finance Act, 2021, an addition concerning escaped income subsequently noticed during reassessment could survive even when no addition was made on the original issue that triggered reopening. It distinguished earlier judgments interpreting the pre-amendment provision.
Facts of the Case
The reassessment proceedings were initiated concerning an alleged receipt of ₹4.20 crore from Sanwaria Vyapaar Pvt. Ltd. The Assessing Officer alleged that the entity was a paper company and that income chargeable to tax had escaped assessment.
However, the reassessment order contained no addition relating to the ₹4.20 crore transaction. Instead, the Assessing Officer disallowed a trading loss arising from transactions in shares of Virtual Global Education Ltd.
The assessee had purchased 17 lakh shares for ₹98,58,646.10 and sold the entire holding for ₹35,10,279.23, resulting in a loss of approximately ₹63.48 lakh. According to the assessment findings reproduced in the order, the shares were purchased on 10 March 2017 and sold on 14 July 2017.
After examining the price movement, financial performance of the company and other relevant details, the Assessing Officer treated the transactions as colourable transactions and disallowed the claimed loss. The total income was consequently assessed at ₹2,07,23,537.
CIT(A) Deleted Addition as Original Reopening Ground Did Not Survive
Before the Commissioner of Income Tax (Appeals), the assessee argued that the reassessment could not sustain an addition on another issue when the original basis for reopening had ceased to survive.
It submitted that no addition had been made concerning the alleged receipt of ₹4.20 crore. Therefore, the Assessing Officer could not independently disallow the share-trading loss, which was not the issue forming the basis of reopening.
The CIT(A) accepted this argument. Relying principally on Ranbaxy Laboratories Ltd. vs. CIT, the appellate authority deleted the addition of ₹63,48,367.
The Revenue appealed against this relief. The Tribunal condoned the 173-day delay in filing the appeal after considering the explanation supported by an affidavit.
Issue Before the Tribunal
The central question was whether, under amended section 147, the Assessing Officer could assess income subsequently noticed during reassessment without making an addition on the original reopening issue.
The assessee relied on Ranbaxy Laboratories Ltd. and ATS Infrastructure Ltd. vs. ACIT. It maintained that the failure of the original ground prevented an independent addition on another issue.
The order records that the Judicial Member initially prepared a draft dismissing the Revenue’s appeal. The Accountant Member disagreed because that approach did not account for the substitution of section 147 from 1 April 2021. The final order dated 23 October 2026 allowed the Revenue’s appeal.
ITAT Examines Change in Section 147
The Tribunal compared the earlier and substituted provisions of section 147.
The earlier provision permitted assessment or reassessment of the income forming the basis of reopening “and also” other escaped income subsequently noticed during the proceedings. Earlier judgments had interpreted these words cumulatively.
Under that interpretation, an addition on the original issue was necessary before an independent addition on another issue could survive.
The Tribunal observed that the substituted provision does not contain the expression “and also”. Further, the Explanation to amended section 147 permits assessment or reassessment of income relating to an issue subsequently coming to the Assessing Officer’s notice during the proceedings, irrespective of compliance with section 148A for that subsequent issue.
Accordingly, the Tribunal held that the earlier decisions relied upon by the assessee were based on statutory language no longer present in the amended provision.
Reliance on Rajasthan High Court Decision
The Tribunal also relied on Papu Ram vs. Assistant Commissioner of Income-tax, reported at [2026] 190 taxmann.com 548 (Rajasthan).
As discussed in the order, that judgment recognised that the Explanation to amended section 147 permits assessment of subsequently discovered escaped income without initiating fresh proceedings under section 148A for the additional issue.
Applying this reasoning, the Tribunal rejected the legal ground on which the CIT(A) had granted relief. The absence of an addition concerning the original ₹4.20 crore transaction did not prevent assessment of the subsequently identified income.
Decision on Share-Trading Loss and Final Outcome
On merits, the Tribunal noted that the assessee’s representative had not argued the substantive issue and that no evidence had been furnished to dispute the Assessing Officer’s findings concerning the share transactions.
It therefore confirmed the disallowance of ₹63,48,367, reversed the CIT(A)’s order and allowed the Revenue’s appeal.
The decision establishes the Tribunal’s view that, under the amended provision applicable to the proceedings, absence of an addition on the original reopening ground does not by itself invalidate an addition concerning subsequently noticed escaped income.
Cases Discussed
- Ranbaxy Laboratories Ltd. v. CIT (2011) 336 ITR 136 (Delhi)
- ATS Infrastructure Ltd. v. ACIT (2025) 473 ITR 595 (Delhi)
- CIT v. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bombay)
- Papu Ram v. ACIT [2026] 190 taxmann.com 548 (Rajasthan)
- CIT v. Adhunik Niryat Ispat Ltd. (2011) 63 DTR 212 (Delhi)
- CIT v. Shri Ram Singh (2008) 306 ITR 343 (Rajasthan)
- Dattatraya Govind Mahajan v. State of Maharashtra (1977) 2 SCC 548
- S. Sundaram Pillai (1985) 1 SCC 591
- State of Andhra Pradesh v. Corporation Bank (2007) 9 SCC 55
- Hardev Motor Transport v. State of MP
- Md. Firoz Ahmad Khalid v. State of Manipur [2025] 173 taxmann.com 909 (SC)
- CIT v. Monarch Educational Society (2016) 387 ITR 416 (Delhi)
- CIT v. Mohmed Juned Dadani (2013) 355 ITR 172 (Gujarat)
