KALPANABEN VADILAL SHAH,AHMEDABAD V. THE ITO, WARD-5(3)(1), AHMEDABAD

ITA 928/AHD/2025

AI Insights

The case involves Kalpanaben Vadilal Shah, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which upheld the addition of Rs.1,40,79,383 to the assessee's income under Section 68 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The addition was based on a reassessment order under Section 147, following a search action on the Kushal group, which allegedly involved the assessee in bogus transactions. The Tribunal found the reopening of the assessment to be invalid due to the vague reasons provided by the AO, leading to the quashing of the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 782581 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 29-04-2025
• Other Referred Cases: Hansaben Girishbhai Shah vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENKUMAR M VASAVADA
• Assessee Lawyers: JAIMIN SHAH
• Keywords: Assessment record; Reason to believe; Borrowed satisfaction; Bogus
• Section: 147; 148; 68; 10

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 928/Ahd/2025 (िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण वष\u0005 वष\u0005 वष\u0005 वष\u0005 / Assessment Year : 2017-18) Kalpanaben Vadilal Shah V.R. Shah Smruti Shikshan Mandir, Nr. Dharnidhar Derasar, Vasna, Ahmedabad – 380007 बनाम बनाम बनाम बनाम/ Vs. The Income Tax Officer Ward-5(3)(1), Ahmedabad \u0001थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ACLPS2588J (Appellant) .. (Respondent) अपीलाथ ओर से /Appellant by : Shri Jaimin Shah, AR यथ क ओर से/Respondent by : Shri Rajenkumar M Vasavada, Sr.DR Date of Hearing 14/10/2025 Date of Pronouncement 29 /10/2025 (आदेश आदेश आदेश आदेश)/ORDER PER ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 07.03.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18. Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 2 – “1. The Commissioner of Income Tax (Appeals), NFAC, has erred in law and on facts while upholding the order passed by assessing officer u/s 147 of the Income Tax Act, 1961, and hence the addition made of Rs.1,40,79,383/- u/s 68 of the I.T. Act 1961 requires to be deleted. 2. That the addition made on the basis of search action taken place in the case of Kushal group on 05/02/2019 and therefore the notice u/s 148 issued on appellant instead of notice u/s 153C is against the provision of law and as such whole proceedings required to be quashed. 3. That the reasons recorded u/s 147 of the Income Tax Act, 1961 is vague, not related to the appellant, which is only a fishing activity, hence not tenable in law. Therefore the whole proceedings initiated u/s 148 of the I.T. Act, 1961 is bad in law and require to be quashed. 4. That the re-assessment order u/s 147 of the Income Tax Act, 1961 was passed on 26/03/2022 without any cogent material on record and without any material which having live link with the information received by the A.O., and hence the re-opening u/s 147 was done by the A.O. on the basis of borrowed satisfaction, which is not valid in law and require to be quashed ab initio. 5. The appellant has provided all material and evidences to prove the genuineness Short Term Capital Gain earned during the year under consideration, however without considering various submissions and material available on record, addition made mealy on mechanical manner on the basis of some general modus operandi, without any evidence against the appellant is bad in law and therefore the addition made u/s 68 r.w.s. 115BBE of the Income Tax Act, 1961 for Rs. 1,40,79,383/- require to be deleted. 6. That the appellant has not under reported or miss reported any Income, however the penalty proceedings initiated u/s 270A of the Income Tax Act, 1961 may please be drop. 7. The appellant has neither committed default of Sec. 210 nor any default of advance payment of taxes and therefore unwanted interest charged u/s 234A 234B, 234C and 234D requires to be deleted. 8. Your appellant craves leave to add, alter, amend or drop any of the grounds till the appeal is finally heard and disposed off.” Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 3 – 2. The brief facts relating to the case are that the assessee had filed return of income originally declaring total income of Rs.66,67,380/-.Later on the case of the assessee was reopened by issuing notice u/s.148 of the Act under belief of the AO that the income of the assessee had escaped assessment. The information in the possession of the AO related to alleged bogus LTCG/STCG claimed by the assessee during the impugned year amounting to Rs.58,71,313/-. The assessee was provided with the copy of reasons and after giving due opportunity of hearing to the assessee, addition was made to the income of the assessee of the entire sale consideration of Rs.1,40,79,383/- on the sale of scrip of Kushal Tradelink Pvt. Ltd. treating it as bogus transaction entered into by the assessee. The addition was made u/s.68 of the Act and was subjected to tax at the rate specified u/s.115BBE of the Act. The addition so made by the AO was confirmed by the Ld. CIT(A). 3. Before us, Ld. Counsel for the assessee stated that the grounds raised by him challenged the order of the Ld. CIT(A)/AO, both on legal grounds as well as on merits of the addition made. The legal grounds, he contended challenged the validity of the assessment framed u/s.147 of the Act. Taking note of the same, the legal ground raised by the assessee was first heard and is being adjudicated upon by us. 4. The contention of the Ld. Counsel for the assessee before us was that the reopening resorted to in the present case was based on Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 4 – reasons which were general and vague ,which did not specify even the nature of the transaction as to whether it was LTCG or STCG/ loss and also did not identify the scrip traded in by the assessee. He contended that the reopening was resorted to on the basis of information available on the Insight Portal without verifying the veracity and truthfulness of the information and, therefore, the reopening resorted to was bad in law and the assessment order passed as a consequence needed to be quashed. He contended that an identical issue arose in the case of Hansaben Girishbhai Shah wherein the ITAT quashed the assessment order finding the jurisdiction assumed by the AO to be not in accordance with law based on general and vague information. He pointed out that the ITAT had passed the order in the case of the said assessee i.e. Hansaben Girishbhai Shah vs. DCIT in ITA No.1279/Ahd/2024 vide order dated 26.08.2025.Copy of the order was placed before us. 5. Ld. DR, however, contended that the AO had correctly assumed jurisdiction to frame assessment u/s.147 of the Act. 6. We have heard both the parties. We have gone through the reasons recorded in the present case, which were placed at paper books page nos.22 & 23 and read as under: “1. Brief details of the assessee: The assessee Navinchandra Amrutial Patel haying PAN ACLPS2588J and the assessee had filed return of income for AY 2017-18 on 29-07- 2017 Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 5 – 2. Brief details of Information collected/received by the AO: In this case, information has been received from the INSIGHT portal of ITBA that assessee has claimed bogus LTCG/STCL of Rs. 58,71,313/- durning F.Y. 2016-17 relevant to A.Y: 2017-18. 3. In this regard, on venification of details received it is noticed that the assessee is one of the beneficianes, who has entered into transactions, during the year under consideration, the assessee has sold the shares for the Rs. 58.71.313/-, In the instant case, it has been proved with condusive evidence that the transaction carried out by the assessee in the scnp, which is a penny stock and is a bogus transaction, 3. Analysis of information collected/ received: On verification of details received, it is noticed that the assessee has made huge transaction during the year under consideration, the assessee has carried out huge transactions of purchase and sale of shares (penny stock). Therefore, it is case where the assessee has invested in shares and carmed out the transactions with her undisclosed income. 4. Enquiries made by the AO as sequel to information collected/ received: On venfication of details received, it is noticed that the assessee is one of the beneficiaries, who has entered into transactions in penny stock during the year under consideration, the assessee has made transaction in the shares the Rs. 58,71,313/-. In the instant case, it has been proved with conclusive evidence that the transaction camed out by the assessee in the above scrip, which is a penny stock and is a bogus transaction. 5. Finding of the A.O. Based on the above information, thus case is a fit case for re-opening u/s 147 of the ad. On verification of above details and information send it is ascertained that during the year under contratton, the assessee has made transaction in the shares for the Rs. 66.71.313 In the instant case it has been proved with conclusive evidence that the transaction carmed out by the assessen in the above sorp, which is a penny stock and is a bogus transaction. The income of Re: 68,71,313/was not offered to tax by the assessee and the same has escaped from assessment fur AY 2017-18 6. Basis of forming reasons to believe and details of escapement of income: From analysis and findings made from information received from INSIGHT portal of ITBA and verification in ITBA portal. ITD, I have reason to believe that the income of Rs. 68.71.313/- has escaped from assessment for AY 2017-18 Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 6 – 1 Applicability of the provisions of section 147/151 to the facts of the case: After analyzing the above information received in INSIGHT Portal of the ITBA, the data made available in the 115 details of the assessee prima facie, I have reason to conclude that the assessee had failed to disclose fully and truly all the particulars of his income. It is evident from the above facts that the assessen had not truly and fully disclosed material facts necessary for its assessment for the year under consideration, thereby necessitating reopening us 147 of the Act It is pertinent to mention here that in this case the assessed has filed its return of income for the year under consideration and no assessment as stipulated u's 2(40) of the Act was made in view of the above, provision of clause (b) of explanation 2 section 147 are application to facts of the case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment The case is within four years from the end of the assessment year under consideration Hence, necessary sanction to issue notice is 148 of the Act has been oblaried from Addl Commissioner of bcome Tax, Range 21. Ahmedabad as per the provisions of section 15.1(2) of the Act.” 7. On perusing the contents of the same, we agree with the Ld. Counsel for the assessee that the said reasons are vague and general and the formation of belief of escapement of income of the AO is merely based on the information on the Insight Portal of the Department which the AO has not even cared to verify and co- relate with the case of the assessee. This is evident from the fact that the AO failed to identify the nature of the transaction whether it was bogus LTCG or bogus STCG, having mentioned both in his reasons recorded. Further, the AO has not even identified the scrip traded in by the assessee. Clearly, the AO has merely referred to the information in the Insight Portal and has not even cared to Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 7 – apply his mind to the said information and derived therefrom the specific scrip in which the assessee has traded and nor has he cared to find out whether the assessee had earned LTCG capital thereon or STCL thereon. Moreover, the return of income filed by the assessee, coy of which was placed before us at paper book page nos. 2 to 4 reveals that the assessee had earned STCG of Rs.47,35,196/- which was returned to tax. The AO, on the other hand, we have noted, has recorded the assessee to have earned LTCG / STCL which clearly reveals that he has not cared to verify information in the Insight Portal from the return filed by the assessee which would have revealed to the AO that the assessee had neither earned LTCG nor STCL, but, in fact had earned STCG of Rs.47.35 Lakhs. The fact of non-application of mind by the AO to the information in his possession and non-verification of the same with the material on record is also revealed from the fact noted by the AO in his reasons that the assessee had claimed STCG/STCL of Rs.58.71 Lakhs while the return filed by the assessee reveals the assessee to have not returned any such gain or loss to the impugned extent i.e. Rs.58.71 Lakhs.On the contrary, the quantum of STCG returned by the assessee is Rs.47.35 Lakhs. Undoubtedly, it is a clear-cut case of the AO forming belief of escapement of income on general and vague information borrowed from Insight Portal of the Department without any application of his mind to it and without verifying the information from the records of the assessee available with the AO.The reasons do not exhibit any reasonable belief of escapement of income of the assessee in the present case. We have noted, as rightly pointed out Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 8 – by the Ld. Counsel for the assessee, that an identical issue was dealt with the ITAT in the case of Hansaben Girishbhai Shah (supra), wherein also the reopening was noted to be resorted to by the AO on the basis of vague and general information without verification by the AO. The ITAT had held the reopening to be bad in law and quashed the assessment so framed. The findings of the ITAT in this regard are contained at page nos. 6 to 7 of the order as under: “6. We have considered the rival contentions of the parties and gone through the record. It is noticed that, in this case, there was a general information available on insight portal of the department that the assessee was beneficiary of some bogus transactions with the Kaushal Group. However, there was no mention about any specific transaction or nature of transaction as to whether it was bogus Long Term Capital Gain/Loss or Short Term Capital Gain/Loss, unsecured loans, share premium, bogus gains, contrived losses, etc. The said information was a general and vague information. The only information available to the AO was that the assessee had engaged into some transaction with Kaushal Group and nothing else. Under those circumstances, the AO was supposed to co-relate to the said information with the assessment records of the assessee, which were very much available with the Department, as earlier, the case of the assessee was selected for scrutiny u/s.143(3) of the Act. However, the AO did not corelate the said general information with the assessment records of the assessee. 6.1. As noted above, the Assessing Officer, in this case, has reopened the assessment solely on the basis of the information available on the insight portal of the department without verifying the veracity and truthfulness of such information. Hon’ble Supreme Court in the case of “Dr. Jagmittar Sain Bhagat & Ors vs Dir. Health Services, Haryana” in Civil Appeal No.5476 of 2013 decided on July 11, 2013, while relying upon another decision of the Hon’ble Supreme Court in the case of “Sushil Kumar Mehta v. Gobind Ram Bohra” (1990) 1 SCC 193 and further placing reliance on the other decisions of the Hon’ble Supreme Court in the cases of “Premier Automobiles Ltd. v. K.S. Wadke & Ors.”, (1976) 1 SCC 496; “Kiran Singh v. Chaman Paswan”, AIR 1954 SC 340; and “Chandrika Misir & Anr. v. Bhaiyalal”, AIR 1973 SC 2391 has observed that where a statute places obligation and enforces the performance in specified manner, performance cannot be forced in any other manner. Under the relevant provisions of section 147 & section 148 of the Income Tax Act, for assuming jurisdiction to reopen an assessment by the Assessing Officer, there is a condition precedent that the Assessing Officer must have reasons to believe that the income of the assessee for that year has escaped assessment. It has been held time and again that such reasons to believe must have a material Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 9 – bearing on the question of escapement of income. It does not mean a purely subjective satisfaction of the assessing authority, such reason should be held in good faith and cannot merely be a pretence. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are \"reason to believe\" and not \"reason to suspect\". There can be no manner of doubt that the words \"reason to believe\" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute \"reason to believe\" has been summed up by the Hon’ble Supreme Court in the case of “Income Tax Officer vs. Lakhmani Mewaldas” (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs. Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s. 148 of the Act was not valid. 6.2. The facts on the file reveal that there was not any specific information available to the AO regarding the escapement of the income of the assessee for the year under consideration. Even, the AO was not aware about the nature of transaction, if any, done by the assessee with Kaushal Group. The AO did not bother to correlate and verify the said general information available on insight portal with the assessment records of the assessee. Even the reasons recorded are factually incorrect as the assessee did not enter into any transaction with Kaushal Group. He just had traded in the script of Kaushal Ltd., wherefrom he has shown STCG, which were offered for taxation. The said issue was duly examined by the AO during the original assessment proceedings. In view of the above discussion, the reopening of the assessment in this case was bad in law. 7. In view of this, since, the reopening of the assessment in this case is bad in law, hence the consequential assessment order passed u/s.143(3) r.w.s.147 of the Act is also bad in law and the same is hereby quashed. The appeal of the assessee stands allowed on this legal ground.” The above decision squarely applies to the facts of the present case, following which, we hold the order passed in the present Printed from counselvise.com ITA No. 928/Ahd/2025 [Kalpanaben Vadilal Shah vs.ITO] A.Y. 2017-18 - 10 – case u/s.147 of the Act is bad in law and direct the order passed to be quashed. 8. Since, we have quashed the assessment framed, the grounds raised on merits are mere academic in nature and not being dealt with by us. 9. In the result, appeal filed by the assessee is allowed in above terms. This Order pronounced on 29 /10/2025 Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 29/10/2025 S. K. SINHA Printed from counselvise.com "