NILESH HARESH PARWANI,MUMBAI V. ACIT CIRCLE - 22(1), MUMBAI, MUMBAI

CO 46/MUM/2025

AI Insights

The case involves an appeal by the Revenue and a Cross Objection by the assessee, Nilesh Haresh Parwani, against the order of the Commissioner of Income Tax (Appeals), which had deleted certain additions made by the Assessing Officer (AO) regarding alleged bogus short-term capital losses and fictitious dividend income. The Tribunal focused on the jurisdictional issue raised in the Cross Objection, specifically the validity of the re-assessment notice issued under section 148 of the Income Tax Act, 1961, which was claimed to be beyond the permissible time limit. The Tribunal's decision was influenced by precedents and concessions made by the Revenue in similar cases, particularly the Supreme Court's decision in Union of India vs. Rajeev Bansal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126142 (ITAT-MUMBAI)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: NTPC vs. CIT, Union of India vs. Ashish Agrawal, Union of India vs. Rajeev Bansal, Pratishtha Garg vs. ACIT, IBIBO Group Pvt. Ltd. vs. ACIT, ACIT vs. Manish Financials, ITO vs. Pushpak Realities Pvt. Ltd., ACIT vs. Nehal Ashit Shah
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARESH DESHPANDE
• Assessee Lawyers: RAKESH JOSHI
• Keywords: Set aside; Period of limitation; Sham transactions; Accommodation entries; Time period of passing order; Bogus
• Section: 147; 148; 143(3); 250; 133A; 264

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.266/Mum./2025 (Assessment Year : 2015–2016) ACIT, Circle-22(1), Room No.322, Piramal Chambers, Parel, Mumbai – 400012. ……………. Appellant v/s Nilesh Haresh Parwani, 501, Chumchum, Saraswati Road, Santcruz (West), Mumbai – 400054 PAN – ANGPP1224L ……………. Respondent CO No.46/Mum./2025 (Arising Out of ITA No. 266/Mum./2025) (Assessment Year : 2015–2016) Nilesh Haresh Parwani, 501, Chumchum Saraswati Road, Santcruz (West), Mumbai – 400054 PAN – ANGPP1224L ……………. Cross Objector (Original Respondent) v/s ACIT, Circle-22(1), Room No.322, Piramal Chambers, Parel, Mumbai – 400012. ……………. Respondent (Original Appellant) Assessee by : Shri Rakesh Joshi Revenue by : Shri Paresh Deshpande, Sr. DR Date of Hearing – 07/04/2025 Date of Order – 24/04/2025 ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 2 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal by the Revenue and Cross Objection by the assessee have been filed challenging the impugned order dated 28.11.2025, passed under section 250 of the Income Tax Act, 1961 (\"the Act\") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2015-16. 2. In its appeal, the Revenue has raised the following grounds: – “1. \"Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) was justified in deleting the addition amounting to Rs. 78,69,650/- being the accommodation entry of bogus Short Term Capital Loss carried out by the assessee through scrip named M/s Pine Animation Limited (Scrip Code: 511421) during the year under consideration'. 2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the crucial finding of the Investigation carried out by the Kolkata Investigation Directorate and their detailed investigation report titled Project Bogus LTCG/ STCG through BSE listed Penny Stock\" and assessee is one of the beneficiary of that dubious scheme. 3. Whether on the facts and in circumstance of the case and in law, Ld. CIT(A) ignores the facts brought on record establishing manipulation of share prices of M/s Pine Animation Limited (Scrip Code: 511421) as part of colourable device to generate fictitious Long Term Capital Gain/ Short Term Capital Loss with the aim to evade taxes due. 4. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO without appreciating the facts that in such penny scrip, trading transactions of purchase and sales are not affected for commercial purpose but to create artificial Gain/loss and complete the cycle of circular trading with a view to evade taxes. 5. On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact that transaction of shares of such penny scrip are not governed by market factors prevalent at relevant time rather transactions are product of design and mutual connivance on part of assessee and operators. 6. \"Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) was justified in deleting the addition made by the AO on transaction ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 3 of fictitious losses in Equity/ Derivative trading amounting to Rs. 49,53,613/- through JM Equity Hybrid Fund -Quarterly Dividend of JM Financial Asset Management Ltd. and fictitious dividend of Rs. 54,36,651/- by entering into these sham transactions\". 7. \"Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the crucial finding of the survey action u/s 133A of the Act that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the SEBI guidelines have been flouted by the J M Mutual Fund by classifying a portion of capital as distributable surplus and thereafter artificial payout to the investor in the form of dividend and assessee is one of the beneficiary.' 8. \"On the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition made by the A.O. even though it is well established that the modus operandi of these sham transactions of generating bogus LTCG/ STCG had to be considered in the light of surrounding circumstances, normal course of human conduct and preponderance of probability.\" 9. \"On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact of the case and modus operandi utilized by entry operators for providing accommodation entries under the garb of Long Term Capital Gain/ Short Term Capital Gain Loss by manipulating/rigging up the share price.\" 3. While in its Cross Objection, the assessee has raised the following grounds: – “1. The Learned CIT(A) has erred in confirming the actions of the Learned Assessing Officer in reopening the assessment u/s.147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 2. The Learned Assessing Officer has erred in passing the assessment order u/s. 147 r.w.s 144B of the Income Tax Act, 1961, which is time barred as per the provision of the Act, therefore, the impugned assessment order is bad in law and required to be quash.” 4. Since the issue raised by way of additional ground in the Cross Objection is a legal issue, which can be decided on the basis of the material available on record, therefore, the same is admitted in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs. CIT, reported in (1989) 229 ITR 383 (SC). ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 4 5. In its appeal, the Revenue has raised the grounds challenging the relief granted by the learned CIT(A) on merits. On the other hand, the assessee has filed the Cross Objection challenging the initiation of re- assessment proceedings under section 147 of the Act. As the issues raised by the assessee vide its Cross Objection are jurisdictional issues, which go to the root of the matter, we are considering the same at the outset. During the hearing, the learned Authorized Representative (“learned AR”), by pressing the grounds raised in the Cross Objection submitted that the notice issued under section 148 of the Act in the present case is beyond the limitation period specified under section 149(1) of the Act, and thus, the re- assessment order passed under section 147 r.w. section 144B of the Act is void ab initio. 6. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual. For the year under consideration, the assessee filed his return of income on 30.08.2015, declaring a total income of Rs.5,66,52,690/-. The return filed by the assessee was selected for scrutiny, and vide order dated 31.12.2017 passed under section 143(3) of the Act, the total income of the assessee was assessed at Rs.6,95,55,810/-. Subsequently, on the basis of the information received through the Insight System of the Department pertaining to survey action conducted under section 133A of the Act in the case of M/s. J.M. Financial Asset Management Limited (“JM Financial”), wherein it was found that JM Financial had manipulated accounting methodology so as to inflate ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 5 the distributable surplus artificially and thereafter paid the same to the investors in the form of dividend, proceedings under section 147 of the Act were initiated in the case of the assessee and notice under section 148 of the Act was issued on 30.06.2021. 7. Subsequently, in view of the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agrawal, reported in [2022] 444 ITR 1 (SC), original notice issued under section 148 on 30.06.2021 was deemed to be issued under section 148A(b) of the Act. Vide show cause notice dated 19.05.2022, the information and material relied upon by the Revenue was provided to the assessee and time was granted to the assessee to respond within two weeks in terms of the provisions of section 148A(b) of the Act. 8. After rejecting the objections filed by the assessee, an order under section 148A(d) of the Act was passed on 23.07.2022, declaring that it is a fit case for the issuance of a notice under section 148 of the Act. Thereafter, on 25.07.2022, a notice under section 148 of the Act was issued by the Jurisdictional Assessing Officer. The assessment order was passed under section 147 r.w. section 144B of the Act, assessing the total income of the assessee at Rs.7,99,46,074/-, after making a total addition of Rs.1,03,90,264/- on account of disallowance of short-term capital loss and dividend income claimed as exempt by the assessee. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee on merits and deleted the additions made by the AO. While on jurisdiction, the learned ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 6 CIT(A) upheld the re-assessment proceedings initiated under section 147 of the Act. Being aggrieved, both parties are before us. 9. During the hearing, the learned AR submitted that the year under consideration is assessment year 2015-16, and therefore, the limitation period available with the Assessing Officer under section 149 of the Act for issuance of notice under section 148 of the Act is till 31.03.2022, and therefore, the notice issued under section 148 of the Act on 25.07.2022 is barred by limitation. Hence, it was submitted that the entire re-assessment proceedings culminating in the order passed under section 147 r.w. section 144B of the Act is void ab initio. The learned AR by placing reliance upon various judicial pronouncements, submitted that a similar challenge in respect of the assessment year 2015-16 has been considered by the Hon’ble Delhi High Court and the Co-ordinate Bench of the Tribunal, and the issue was decided in favour of the taxpayer, inter alia, by considering the submission of the Revenue before the Hon’ble Supreme Court in Union of India vs. Rajeev Bansal, reported in (2024) 469 ITR 46 (SC). 10. On the other hand, learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the AO. 11. We have considered the submissions of both sides and perused the material available on record. We, at the outset, find that similar issue pertaining to the challenge against notices issued under section 148 of the Act for the assessment year 2015-16 on the basis that same are beyond the limitation period prescribed under section 149 of the Act has been decided in ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 7 favour of the taxpayers after noting the submission of the Revenue before the Hon’ble Supreme Court in Rajeev Bansal (supra), wherein it was conceded by the Revenue that for the assessment year 2015-16, all notices issued on or after 1st April, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“the TOLA”). We find that the Hon’ble Delhi High Court in Pratishtha Garg vs. ACIT, reported in (2015) 171 taxmann.com 264 (Delhi), allowed the writ petition filed by the taxpayer and set aside the notice issued under section 148 of the Act for the assessment year 2015-16, by observing as follows: - “2. Learned counsel for the Revenue fairly states that the prayers made by the petitioner are required to be allowed as the same are covered by the concession made by the Revenue before the Supreme Court in Union of India and Others v. Rajeev Bansal: 2024 SCC OnLine SC 2693, 2024 INSC 754, as recorded in paragraph 19 (f) of the said decision. He also submits that the Coordinate Bench of this Court had, after not ing the aforesaid concession, allowed a similar petition - Ibibo Group Pvt. Ltd. v. Assistant Commissioner of Income Tax Circle: W.P.(C) 17639/2022 by order dated 13.12.2024. 3. It is relevant to note paragraph 19 (e) and (f) of the decision of the Supreme Court in Union of India and Others v. Rajeev Bansal; 2024 SCC OnLine SC 2693. The same are set out as under: \"(e) The Finance Act, 2021 (2021) ((2021) 432 ITR (Stat) 52) substituted the fold regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149(1)(b) is read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017- 2018 will be within the period of limitation as explained in the tabulation below: Assessme nt Year Within Years Expiry of Limitation read with TOLA for (2) (3) Within Six Years (4) Expiry of Limitation read with TOLA for (4) (5) 2013-2014 31.03.2017 TOLA not applicable. 31.03.2020 30.06.2021 ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 8 2014-2015 31.03.2018 TOLA not applicable. 31.03.2021 30.06.2021 2015-2016 31.03.2019 TOLA not applicable. 31.03.2022 TOLA not applicable. 2016-2017 31.03.2020 TOLA not applicable. 31.03.2023 TOLA not applicable. 2017-2018 31.03.2021 TOLA not applicable. 31.03.2024 TOLA not applicable. (f) The Revenue concedes that for the assessment year 20152016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.\" 4. In view of the aforesaid, the impugned order dated 19.07.2022 issued under Section 148(A)(d) of the Income Tax Act,1961 (hereafter the Act) as well as the notice dated 19.07.2022 issued under Section 148 of the Act in respect of AY 2015-16 are liable to be set aside. It is so directed.” 12. We further find that similar findings were rendered by the Hon’ble Delhi High Court in IBIBO Group Pvt. Ltd. vs. ACIT, in W.P .(C) No.17639 of 2022, vide order dated 13.12.2024. We find that in the following decisions of the Co-ordinate Bench of the Tribunal, on similar lines, re-assessment notices issued under section 148 of the Act for the assessment year 2015-16 were quashed: -  ACIT vs. Manish Financials, ITA No.5050 and 5055/Mum/2024 order dated 02.12.2024.  ITO vs. Pushpak Realities Pvt. Ltd., ITA No.4812/mum/2024, order dated 07.09.2024. 13. We further find that vide a recent order dated 04.04.2025, the Hon’ble Supreme Court in ACIT vs. Nehal Ashit Shah, in SLP (C) Diary No.57209 of 2024, upheld the quashing of the re-assessment proceedings initiated for the assessment year 2015-16 considering the submissions of the Revenue as recorded in paragraph 19(e) and 19(f) of the decision in Rajeev Bansal (supra). ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 9 14. Therefore, it is evident that the Hon’ble Courts, consistently considering the submissions made by the Revenue before the Hon’ble Supreme Court in Rajeev Bansal (supra), have held that the re-assessment notice issued under section 148 of the Act for the assessment year 2015-16 is barred by limitation. Thus, on this limited basis alone, the notice dated 25.07.2022, issued under section 148 of the Act in the present case, is liable to be quashed, being time-barred under the provisions of the Act. We order accordingly. Consequently, the entire re-assessment proceedings and assessment order passed under section 147 r.w. section 144B of the Act are also quashed. 15. Since the relief has been granted to the assessee on the afore-noted jurisdictional aspect, the other submissions raised by the learned AR during the hearing are rendered academic and, therefore, are left open. 16. Accordingly, the appeal by the Revenue on merits has been rendered academic and, therefore, is dismissed as infructuous. 17. In the result, the Cross Objection by the assessee is allowed, while the Revenue’s appeal is dismissed. Order pronounced in the open Court on 24/04/2025 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 24/04/2025 Prabhat ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) Page | 10 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "