Shailesh Vallabhdas Makadia (HUF) Vs ITO (ITAT Rajkot)
Rajkot ITAT Quashes ₹1.33 Crore Penny-Stock Addition: Section 148 Notice Actually Issued on 1 April 2021 Must Follow New Section 148A Regime – Date Printed as 31 March Is Irrelevant
The Rajkot ITAT in Shailesh Vallabhdas Makadia (HUF) v. ITO quashed reassessment proceedings for AY 2013-14 involving an alleged bogus LTCG of ₹1.33 crore from penny-stock transactions.
The reassessment was based on Investigation Wing information alleging that the assessee was a beneficiary of accommodation entries routed through shell companies, including Ayaan Commercial Pvt. Ltd., and had allegedly received bogus LTCG of ₹1,33,14,815 through the scrip “Access Global.” The AO treated the entire amount as unexplained cash credit under section 68 read with section 115BBE.
The section 148 notice bore the date 31 March 2021, but the Income-tax portal established that it was actually issued on 1 April 2021. This distinction proved fatal to the reassessment.
The Tribunal held that once the notice was actually issued on or after 1 April 2021, the substituted reassessment provisions introduced by the Finance Act, 2021 became applicable. Therefore, the AO was mandatorily required to follow the new procedure, including section 148A. The AO could not proceed under the erstwhile reassessment regime merely because the notice carried the date 31 March 2021.
Relying on the Supreme Court judgment in Union of India v. Rajeev Bansal, the ITAT reiterated that TOLA merely extended limitation; it did not postpone the commencement of the new reassessment regime from 1 April 2021. Hence, notices issued from that date had to comply with the substituted provisions.
Since the mandatory section 148A procedure was admittedly not followed, the Tribunal held that the AO’s assumption of jurisdiction was invalid. It quashed the reassessment as void ab initio and consequently deleted the entire ₹1.33 crore addition. The assessee’s appeal was allowed.
Cases Discussed
