Reopening on Another Person’s NSEL Data: ₹92 Lakh Addition Quashed

Premlata Santosh Kumar Maheshwari Vs ITO (ITAT Mumbai)

Reopening on Another Person’s NSEL Data: ₹92 Lakh Addition Quashed

An investigation report may give the Assessing Officer reason to examine a taxpayer’s transactions. But the information used to reopen her assessment must first be connected to that taxpayer. In this case, the Mumbai ITAT found that the transaction details relied upon in the section 148A(d) order bore another person’s name and PAN. It quashed the reassessment and, with it, an addition of ₹92,06,400 arising from alleged NSEL commodity transactions.

How the addition arose

Premlata Maheshwari had filed her original return for AY 2014–15 declaring income of ₹38,840. The Department later received information flowing from an SFIO investigation into National Spot Exchange Limited (NSEL). The wider report concerned client code modifications by brokers and transactions on the NSEL platform. On the basis of information attributed to the assessee, the Assessing Officer proceeded on the footing that she had undertaken transactions aggregating to ₹92,06,400 which were not disclosed in her original return.

Following proceedings under section 148A, a notice under section 148 was issued on 30 July 2022. In response, the assessee filed a return declaring income of ₹1,49,110, including ₹1,10,277 as speculative business profit from commodity transactions. She furnished purchase and sale contract notes and maintained that she had deposited ₹30 lakh with her broker, Anand Rathi Commodities Ltd. The Assessing Officer noted that documentary support for the asserted deposit had not been produced and sought an explanation of the source and mode of funding the transactions.

The Assessing Officer treated the entire ₹92,06,400 as unexplained money under section 69A. The CIT(A) upheld the addition, finding the explanation and supporting material insufficient. The assessee then challenged both the reopening and the addition before the Tribunal.

The person named in the reopening material

The decisive finding emerged when the Tribunal examined the information in the section 148A(d) order. The alleged transactions relied upon there were shown in the name of “Premila Bharat Kumar Shah”, with a PAN different from that of Premlata Maheshwari. The material furnished for reopening therefore did not identify the assessee as the person involved in those particular client code modifications.

The Tribunal was careful about what this did and did not mean. It did not find that Premlata Maheshwari had never traded on the NSEL platform. She had acknowledged commodity transactions and disclosed a profit from them in her return filed in response to the section 148 notice. Its objection was that the specific information used as the foundation for reopening belonged to somebody else. The order under section 148A(d) did not establish her involvement as the original or modified client in the transactions on which the Department relied.

There was also a difference in the figures. The Department had taken a transaction value of ₹92,06,400, whereas the value of transactions admitted by the assessee was ₹80,30,693. The Tribunal further noted from the broker’s ledger that the transactions were in the nature of intraday trades and that no effective payments to the broker were shown during the year. These facts made it necessary to examine the actual transactions and funding before treating the gross transaction figure as an unexplained amount deployed by the assessee.

The Department’s case remained that she had failed to satisfactorily explain the source of funds. The Tribunal acknowledged that concern, but held that it could not cure the more basic flaw in the reopening: the proceedings had been initiated on the strength of information naming another assessee, without proper enquiry linking it to Premlata Maheshwari.

The Tribunal’s decision

The ITAT held that reliance on another person’s data showed non-application of mind at the section 148A(d) stage. Reopening based on a presumption, without properly establishing the assessee’s connection to the alleged escaped income, could not be sustained. It accordingly quashed the reassessment order under section 147.

Once the reassessment was quashed, the ₹92,06,400 addition had no surviving foundation in those proceedings. The Tribunal did not separately decide the substantive arguments concerning the applicability of sections 68 or 69A, nor did it adjudicate the additional ground challenging the approval under section 151.

Author’s comment

The important distinction is between evidence that an assessee traded and evidence that the particular transactions cited for reopening belonged to that assessee. Here, the assessee’s admission of some commodity trading did not validate reopening based on a client code modification record bearing a different name and PAN.

The case also illustrates the danger of treating aggregate purchase or sale values as an unexplained investment without checking settlement records, broker ledgers and the money actually deployed—especially where purchases and sales are squared off on the same day. The Tribunal’s operative ruling, however, is jurisdictional: the reassessment failed because the material used to initiate it was not properly matched to the assessee. It should not be cited as a final merits finding that every NSEL transaction, or every intraday trade of this kind, is free from enquiry under the unexplained-income provisions.

Cases Discussed

• Union of India & Ors. v. Ashish Agarwal & Ors., Civil Appeal No.3005/2022 dated 4th May, 2022 — referred to in relation to the directions pursuant to which the section 148 notice was issued.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI

This appeal is preferred by the assessee, directed against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 26.11.2025 for the Assessment Year (AY) 2014-15, arises from the assessment order under section 147 r.w.s 144B of the Income Tax Act, 1961 [in short, “the Act”] dated 16.05.2023, passed by Assessment Unit, Income Tax Department [in short, “the Ld. AO”].

2. The grounds of appeal raised by the assessee are as under:

1. The Ld.CIT(A)has erred in law and in fact by not appreciating that the Ld.A.O.has Passed an order u/s 147 r.w.s.144B of the Act which is bad in law and illegal.

2. The Ld. AO has erred in law and in facts in not appreciating that the notice issued u/s 148 of The Act and the reassessment proceedings conducted u/s 147 of the Act without jurisdiction, bad in law and void ab initio.

3. The Ld.CIT(A) has erred in law and in facts in confirming the addition on account Of alleged unexplained commodity transaction through client code modification Of Rs.92,06,400/-u/s.69 r.w.s.115BBE of the Act.

4. Your appellant craves leave to, alter, amend, add or delete all or any of the above Grounds of appeal.

Additional Grounds

1. The Ld. CIT(A) ought to have appreciated that the reopening of the assessment u/s. 147 of the Act was invalid since the approval granted is not in accordance with S. 151 of the Act.

3. Briefly stated, the assessee, an individual, filed her return of income on 28.07.2014 declaring total income of ₹38,840/-. Subsequently, information was received from the Deputy Director of Income Tax (Inv.), Unit–6(3), Mumbai, based on an investigation conducted by the Serious Fraud Investigation Office (SFIO) into the affairs of National Spot Exchange Limited (NSEL). The investigation report, shared with the Director General of Income Tax (Investigation), Mumbai, inter alia, dealt with instances of client code modification by certain brokers. As per the information, 219 brokers had carried out 51,565 client code modifications involving purchase and sale transactions aggregating to ₹6,311 crores. It was reported that the purchase and sale transactions were generally executed on the same day and that the brokers were allegedly involved in unauthorised funding against warehouse receipts. The investigation further recorded that no physical delivery of goods had taken place in the trades conducted on the NSEL platform.

4. In the case of the assessee, the Assessing Officer observed that the assessee had undertaken transactions on the NSEL platform during the previous year relevant to AY 2014-15, aggregating to ₹92,06,400/-, which, according to the Assessing Officer, had not been disclosed in the original return of income. On the basis of the aforesaid information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment to the extent of ₹92,06,400/-.

5. Accordingly, after following the directions of the Hon’ble Supreme Court in Union of India & Ors. v. Ashish Agarwal & Ors., notice under section 148 of the Income-tax Act, 1961 was issued on 30.07.2022. On the same date, an order under section 148A(d) was passed with the prior approval of the specified authority. In response to the notice under section 148, the assessee filed her return of income on 22.08.2022 declaring total income of ₹1,49,110/-. Thereafter, notices under sections 143(2) and 142(1) were issued calling upon the assessee to furnish details and information relating to her transactions on the NSEL platform. In response thereto, the assessee furnished her reply on 24.01.2023 along with copies of the purchase and sale contract notes. However, the assessee did not furnish a copy of the demat account as called for by the Assessing Officer.

6. After considering the assessee’s response, wherein the validity of the reopening of assessment was also challenged, the Ld. AO rejected the objection and held that the reassessment proceedings were validly initiated after obtaining the prior approval of the specified authority. The Ld. AO thereafter discussed the findings emerging from the investigation conducted in relation to transactions on the NSEL platform and, on the basis thereof, examined the transactions undertaken by the assessee.

7. It was submitted by the assessee before the Ld. AO that she had deposited ₹30,00,000/- with her broker, M/s. Anand Rathi Commodities Ltd., in December 2012. However, the assessee did not furnish any documentary evidence in support of the said claim. Further, in response to notice under section 148 of the Act, the assessee filed her return of income declaring income of ₹1,10,277/- under the head “Profit from Speculative Business”, thereby admitting profit arising from commodity transactions.

8. The Ld. AO further observed that the assessee had undertaken transactions aggregating to ₹92,06,400/- on the NSEL platform during the previous year relevant to AY 2014-15. According to the Ld. AO, although the assessee had admitted the profit arising from commodity transactions, she had failed to furnish satisfactory details regarding the nature and source of the funds deployed in the commodity transactions aggregating to ₹92,06,400/-, as well as the mode through which the corresponding payments were made. On this basis, the Ld. AO proceeded to examine the source of the investment in the NSEL transactions.

9. Accordingly, as per Ld. AO the nature and source of investment of aforesaid amount remains unexplained in the hands of assessee. A final show-cause notice was also issued on 28.04.2023 to furnish reply before 04.05.2023, but the assessee chooses not to utilize this opportunity. In absence of satisfactory explanation on the part of assessee, the Ld. AO added the entire amount of investment amounting to Rs.92,06,400/- treating the same as unexplained money in the hands of assessee u/s 69A and added to the taxable income of the assessee.

10. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The assessee again raised the issue of validity of re-opening before the Ld. CIT(A) which is dismissed by him. On merits, Ld. CIT(A) referred to section 68/69A and held that the onus under these sections is very high, requiring the assessee to prove the source, nature and genuineness of the transaction. Ld. AO has established that the assessee was identified as a beneficiary in a scheme involving non-genuine transaction amounting to Rs.92,06,400/-. Given the information and nature of the transaction, the assessee’s mere reliance on the broker’s letter is a flimsy defense and does not constitute a satisfactory explanation sufficient to discharge the onus cast by the Act. The Ld. AO was justified in concluding that the entire amount represents unexplained investment/money. Further, the assessee’s plea for cross-examination of Shri Chetan Pitamber was rejected by the Ld. CIT(A) stating that the denial of cross-examination is not fatal, where adverse inference is drawn from objective, corroborated material and not solely from an uncorroborated statement. The assessee failed to furnish any alternate credible and evidence-backed explanation for source and genuineness of the large sum identified.

11. Before us, Ld. Counsel of assessee raised an additional ground regarding validity of re-opening assessment u/s 147 alleging that the approval granted u/s 151 was not in accordance with the mandate of law. He referred to the first notice issued u/s 148 dated 20th April, 2021 wherein the approval was granted by Ld. PCIT Mumbai-19. He further referred to the final notice u/s 148 issued in terms of directions of Hon’ble Apex Court in the case of Union of India and others vs. Shri Ashish Agarwal and Others, Civil Appeal No.3005/2022 dated 4th May, 2022 wherein the approval was granted by Pr. CCIT Mumbai on 25.07.2022.

12. At the outset, Ld. Counsel of assessee submitted that the notice u/s 148A(b) was issued on 25.05.2022 wherein the Ld. AO has relied upon the information received from DDIT (Inv.) in connection with certain transactions carried out by the assessee, which were alleged to be on account of client code modification (CCM). The said information stated that the assessee was one of the clients whose name is included in the list of modified clients in the details provided by NSEL. The addition was made on the basis of reasoning that the assessee could not explain transactions carried out at NSEL and, therefore, the same constitute unexplained cash credit within the meaning of section 68 or unexplained money u/s 69A of the Act. It is submitted that the additions made by Ld. AO were completely unjustified and without considering the documentary evidence available on record. The Ld. AR further furnished the details of transactions before us which is extracted as under:

13. The Ld. AR submitted that the assessee had furnished all necessary documentary evidence before the Ld. AO in respect of the transactions under consideration, including the details furnished by the broker, M/s. Anand Rathi Commodities Ltd., the ledger account of the assessee maintained with the broker, and the relevant contract notes. Copies of the aforesaid documents were also placed before the Tribunal at pages 60 to 64 of the paper book.

14. It was contended that the provisions of section 69A of the Act were not attracted in the present case, as there was no finding of any money, bullion, jewellery or other valuable article being found in the possession or ownership of the assessee which was not recorded in the books of account and for which the assessee had failed to offer a satisfactory explanation regarding its nature and source. According to the Ld. AR, the transactions in question were duly recorded and, in fact, the assessee had admitted profit of ₹1,10,277/- arising from the said transactions, which was duly disclosed in the return of income filed in response to notice under section 148 of the Act.

15. The Ld. AR further submitted that the transactions related to commodity trading and did not represent money, bullion, jewellery or other valuable articles so as to attract section 69A of the Act. As regards section 68, it was contended that the said provision applies to unexplained cash credits appearing in the books of account, whereas, in the present case, there was no cash credit in the books of the assessee. It was submitted that the Ld. AO had proceeded on the premise that the assessee had made an unexplained investment of ₹92,06,400/- in securities/commodity transactions, which, according to the Ld. AR, could not constitute a cash credit so as to invoke section 68.

16. Accordingly, the Ld. AR contended that the additions made by the Ld. AO by invoking sections 69A and 68 of the Act were without statutory basis.

17. Without prejudice to the aforesaid submissions, the Ld. AR, in the alternative, submitted that the assessee had not made any investment of ₹92,06,400/- as alleged by the Ld. AO. It was contended that the aforesaid figure represented the aggregate value of the transactions allegedly undertaken on the NSEL platform and that the information relied upon by the Ld. AO pertained to some other assessee and was not relatable to the assessee under consideration. It was, therefore, submitted that the said amount could not, by itself, be regarded as an investment made by the assessee or treated as unexplained investment in her hands. In support of the aforesaid contention, the Ld. AR referred to the transaction-wise details of the amounts treated by the Ld. AO as unexplained, which are reproduced hereunder:

18. It was the submission that the break-up of transaction tabulated in the chart submitted, extracted (supra) shows that the purchased commodities were sold on the same date and the assessee was only entitled to the profit in the transaction. The fact is also evident from the contract notes in respect of such transactions. It is further submitted that the assessee has not made any payment for purchase of commodities through these transactions and the purchases were squared off against sale/transaction executed on the same date. Therefore, there was no investment made by the assessee in the securities. Accordingly, the transactions cannot be treated for their entire amount to be unexplained investments. It is also submitted that the main genesis of the allegation that the assessee was involved in CCM transactions was also not correct as the details of CCM provided in the order u/s 148A(d) do not show the name of assessee as a beneficiary of modified client in CCMs.

19. Per contra, Ld. DR referred to the findings of Ld. AO in assessment order and findings of Ld. CIT(A) in appellate order wherein the main allegation was regarding the source of funds which the assessee has utilized in such transactions and, therefore the assessee was under obligation to furnish details and explain the nature and source of such investments which were used for such transactions. It was therefore, submitted that the Ld. AO and Ld. CIT(A) have rightly adjudicated the issue and accordingly the additions made deserves to be sustained.

20. We have considered the rival submissions, perused the material available on record. On perusal of the order u/s 148A(d), we find that the alleged transactions which were considered to be undertaken by the assessee are shown in the name of “Premila Bharat Kumar Shah, PAN No. ABRPG5272C”. Accordingly, the information furnished along with notice u/s 148A(d) do not reflect any information regarding the assessee. The contention of assessee, thus, that details do not pertain to assessee have been accepted, as borne out from the records. While the assessee has actually carried out such transactions and have furnished the details of buy quantity and sale quantity, but non furnishing of such information in reopening order u/s 148A(d), shows non application of mind by the Authorities, which vitiates the proceedings u/s 148A(d) and consequently entire reassessment. Further, the allegation of Ld. AO and Ld. CIT(A) was regarding the assessee’s investment in such transactions for which nature and source was requested to furnish; however, the assessee had not furnished any information regarding the nature and source so as to establish the genuineness of such transactions. We may herein note that the transaction value taken for Rs.92,06,400/- was different from the admitted value of transactions by the assessee amounting to Rs.80,30,693/-. Further, from the ledger account of assessee maintained by M/s. Anand Rathi Commodities Ltd. furnished before us at page nos. 41 to 44, the assessee has undertaken/carried various transactions during the entire previous year i.e., 2013-14, but the assessee had not made any payment to the broker. Under such circumstances, while the transactions were under taken in the nature of intraday transactions with no effective payments were made.

21. We, thus in terms of aforesaid observations are of the considered view that the reopening on the basis of presumption, without proper enquiry qua the escapement of income, by furnishing information of some other assessee, does not prove involvement of assessee as original client or modified client, so as to invoke reopening provisions in accordance with the mandate of law, cannot be treated legal so the impugned order u/s 147 would be liable to be quashed.

22. Since the issue regarding substantive addition has been struck down by quashing the impugned re-assessment, the additional ground raised by the assessee, became infructuous, so have not been adjudicated.

23. In result, the appeal of assessee is allowed, in above terms.

Order pronounced in the open court on 21-09-2026.