SAMEER GEHLAUT,LONDON V. DCIT, MUMBAI

ITA 2532/MUM/2025

AI Insights

The case involves Shri Sameer Gehlaut, who appealed against the order of the CIT(A) - 54, Mumbai, which pertained to the assessment year 2017-18. The primary contention was regarding the validity of the jurisdiction assumed under Section 147 of the Income Tax Act and the subsequent directions issued under Section 251(1)(a) for a fresh assessment. The AO had added Rs. 510 Crores to the income of the assessee, alleging that these were benefits received in the guise of investments from entities controlled by RADAG and Shri Harish Fabiani Group. The CIT(A) set aside the assessment for a fresh inquiry, which was contested by the assessee on grounds of jurisdiction and applicability of the law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714472 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Mahindra and Mahindra Ltd., CIT vs. Sony Mobile Communications, Mrs. Bacha F Guzdar v. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATYAPRAKASH R.SINGH; DR
• Assessee Lawyers: GAUTAM JAIN; AR
• Keywords: Set aside; Unexplained cash credit; Salary income; Source of fund
• Section: 147; 144; 68; 28

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 2532/Mum/2025 Assessment Year: 2017-18 Shri Sameer Gehlaut Apartment 6, 01, 5 Stanhope Gate London United Kingdom – W1K1AH [PAN: AFMPG9469E] Vs Deputy Commissioner of Income, Tax, Central Circle – 6(4), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Gautam Jain, A/R Revenue by : Shri Satyaprakash R. Singh, CIT D/R सुनवाई की तारीख/Date of Hearing : 23/07/2025 घोषणा की तारीख /Date of Pronouncement: 05/08/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the ld. CIT(A) - 54, Mumbai [hereinafter ‘the CIT(A)’] dated 13/02/2025 pertaining to AY 2017-18. 2. The grievance of the assessee reads as under:- “1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and, on facts in upholding the assumption of jurisdiction u/s 147 of the Act. 2. That the learned Commissioner of Income Tax (Appeals)-54, Mumbai has also erred both in law and, on facts in holding that the assessment order dated 16.3.2022 u/s 144 read with 147 of the Act is set aside to the file of the AO for making fresh assessment order, after conducting further inquiries as mentioned in para 8 of the CIT(A) order and any further inquiry, if necessary, by erroneously invoking provisions to section 251(1)(1)(a). 2.1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/144 of the Act was invalid and, the addition made was not in Printed from counselvise.com I.T.A. No. 2532/Mum/2025 2 accordance with law no direction could be issued and as such the aforesaid impugned order ought to have been held as illegal, invalid and without jurisdiction for the instant assessment year. 3. That the directions issued by the learned Commissioner of Income Tax (Appeals) to the learned Assessing Officer are otherwise too beyond the scope of power vested u/s 251 of the Act; and thus otherwise without jurisdiction. 4. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and, on facts in not deleting the addition of Rs. 510 crores representing alleged benefit to the appellant brought to tax erroneously u/s 28(iv) of the Act. Prayed: is therefore prayed that it be held that direction of the learned Assessing Officer u/s 251(1)(a) of the Act to the assessment order u/s 144 read with 147 dated 16.3.2022 is set aside to the file of the AO for making fresh assessment order be held to be without jurisdiction and deserves to be quashed as such.” 3. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963. 4. The peculiar facts are that Indiabulls Housing Finance Ltd. (IBHFL) has extended approximately Rs. 1514 Crores of loans to the entities of Reliance Anil Dhirubhai Ambani Group (RADAG) i.e., Reliance Interactive Advisors Private Limited, Reliance Inceptum Private Limited, Zapak Digital Entertainment Private Limited and Relaince Big Entertainment Private Limited in different years. IBHFL advance loans of Rs. 130.5 Crores to the entities of Shri Harish Fabiani Group, namely, Transpacific Business Services Private Limited, Americorp Business Services Private Limited, Americorp Capital Private Limited and Chennai Business Park Private Limited. The other entities of RADAG , namely, Reliance Corporate Advisory Private Limited and Reliance Capital Limited, in turn have given huge funds to various private holding companies in which assessee is a majority shareholder and these funds have been given under the garb of subscription of the OCDs (Optionally Convertible Debentures) and CCDs (Compulsorily Convertible Debentures) carrying 0.01% interest rate per annum during the same period in which loans were sanctioned by IBHFL to Group companies of RADAG. The Printed from counselvise.com I.T.A. No. 2532/Mum/2025 3 entities of Shri Harish Fabiani Group i.e., Joindre Fiannce Private Limited and Jasol Investment & Trading Private Limited have invested in the shares of the entities controlled by Shri Sameer Gehlaut. The entire financial transactions can be understood from the following chart:- Printed from counselvise.com I.T.A. No. 2532/Mum/2025 4 4.1. The aforementioned facts are undisputed. The quarrel is the allegation of the AO that the assessee’s owned/controlled entities have received huge funds in the garb of subscription of debentures carrying low interest rates of 0.01% from the companies of RADAG and Shri Harish Fabiani Group. The AO further alleged that the entities owned/controlled by the assessee have no significant financial and business activity and no prudent businessman would invest in companies with such financial profile. The AO further alleged that the investor companies i.e., RADAG and Shri Harish Fabiani Group are owned/controlled by the promoters whose other flagship business concerns have received huge loans from the company promoted by the assessee, namely, IBHFL. There is no justification for huge investments in debentures by the companies of the above named business group in the entities owned by the assessee. 4.1.1. On such assumption, the AO came to the conclusion that the assessee has been benefitted by Rs. 510 Crores arising from exercise of a profession by misusing his position to grant huge loans from IBHFL to entities of RADAG & Shri Harish Fabiani Group and in turn received investments in the garb of subscription of OCDs or CCDs. 4.2. The AO was of the firm belief that the benefit accrued to the assessee in the form of investments amounting to Rs. 510 Crores in the entities owned/controlled by him, qualifies to be benefit arising from the exercise of profession under the provisions of Section 28(iv) of the Act liable to be taxed in the hands of the assessee. Accordingly, the addition of Rs. 510 Crores were made by the AO under the head income from business and profession. 4.3. The assessee agitated the matter before the ld. CIT(A) and on the facts mentioned by the AO in his assessment order, the ld. CIT(A) in his wisdom, set aside the assessment. The relevant findings of the ld. CIT(A) read as under:- “I, therefore, remit the matter back to the AO to frame denovo assessment by making further inquiry in the following areas among other things which the AO himself may require. 1. The AO shall examine the dates of subscription of loans by INDIABULLS group to ADAG Group and Fabiani Group. Printed from counselvise.com I.T.A. No. 2532/Mum/2025 5 2. The AO shall examine as to who the directors of ADAG group and Fabiani group are subscribing to OCD to appellant controlled company by examining the directors by issuing summons and recording their statements under the applicable law particularly when ADAG group and Fabiani group were in need of funds and borrowed from INDIA BULLS. 3. The AO shall examine as to who the directors of appellant group are receiving OCD. 4. The AO shall examine the directors of ADAG group and Fabiani group subscribing to OCD to appellant controlled company. 5. The AO shall also examine as to need and business interst therein for ADAG group and Fabiani group to subscribe the OCD to appellant controlled company. 6. The AO shall also examine as to source of funds by companies controlled by ADAG group and Fabiani Group to subscribe the OCD to appellant controlled company. 7. The AO shall also examine the end use of funds by the companies receiving OCD. 8. The AO shall also examine as to whether any board resolution was passed either for receiving OCD or subscribing to OCD. Based on examination in the above line apart from other inquiries which the AO may think so for assessment. 9. As discussed above the assessment order for A.Y. 2017-18 was passed by the AO u/s 144 r.w.s. 147 of the Act. Therefore, as per the proviso to Section 251(1)(a) of the Act, the assessment order u/s 144 r.w.s. 147 dated 16/03/2022 is set aside to the file of the AO for making fresh assessment order, after conducting further inquiries as mentioned in Para 8 and any further inquiry, if necessary.” 5. We have given a thoughtful consideration to the orders of the authorities below and in particular, the directions issued by the ld. CIT(A) while setting aside the assessment. In our considered opinion, the ld. CIT(A) erred in giving directions to the AO while setting aside the assessment, firstly, for the following reasons:- “42. Section 251 of the Act as it amended by Finance Act No. 2 at 2024 w.e.f. 1.10.2024 reads as under: \"Powers of the Joint Commissioner (Appeals) or the] (Commissioner (Appeals)] 251 (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- a) in an appeal against an order of assessment, he may confirm, reduce enhance or annual the assessment Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making afresh assessment;\" 43. That in Finance Bill' 2022 an amendment had proposed in section 251 of the Act reported in 465 ITR 55 at page 114 (St.) provides as under: Printed from counselvise.com I.T.A. No. 2532/Mum/2025 6 \"77 Amendment of section 251.- In section 251 of the Income Tax Act, in sub-section (1), in clause (a), the following proviso shall be inserted with effect from the 1st day of October, 2024, namely:- Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.\" 44. Further notes on clauses to the Finance Bill' 2024 in this respect as reported in 465 ITR 152 at page 203 (St.) reads as under: \"Clause 77 of the Bill seeks to amend section 251 of the Income-tax Act relating to powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). Sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter alia, the powers to confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of assessment; or confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty while disposing of such appeal. It is proposed to amend the said sub-section by inserting a proviso in clause (a) of subsection (1) thereof to provide that where an appeal is against an order of assessment under section 144, the Commissioner (Appeals) shall have the power to set aside such assessment made under section 144, and refer the case back to the Assessing Officer for making a fresh assessment. This amendment will take effect from Ist October, 2024.* 45. Also memorandum explaining the Finance Bill' 2024viz-a-viz the above amendment reported in 465 ITR 213 at pages 268-269 (St.) reads as under: \"Powers of the Commissioner (Appeals) The existing provisions of section 251 of the Act specify the powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). Further, sub- section (1) of the said section provides that Commissioner (Appeals) shall have, inter-alia, the following powers in disposing of an a) He may confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of b) He may confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty. 2. Further, sub-section (4) of section 250 of the Act prescribes that Commissioner (Appeals) may seek the report from the Assessing Officer after making further inquiry, before disposing any appeal. 3. It has been found that in the best judgement cases, taxpayers remain nonresponsive to the letters or notices issued by the Faceless Assessing Officer. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order. Printed from counselvise.com I.T.A. No. 2532/Mum/2025 7 4. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, it is proposed that the cases where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. Further, it is proposed to make consequential amendment in section 153(3) of the Act in order to provide the time limit for disposal of cases which are set aside by the Commissioner (Appeals). 5. This amendment will take effect from the Ist day of October, 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024.” 5.1. The aforementioned amendment has to be read along with the earlier provisions as they stood prior to amendment by Finance Act, 2001 w.e.f. 01/06/2001:- “46. It may be stated here that section 251(1)(a) of the Act as its stood prior to amendment by Finance Act 2001 w.e.f. 1.6.2001 reads as under: a) in an appeal against an order of assessment, he may confirm, reduce enhance or annual the assessment Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making afresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further inquiry as may be necessary; and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment\" at the end” 47. The scope and effect of the amendment was explained by the board in Circular No. 14 dated 12.12.2001 reported in 252 ITR 65 (St.) reads as under: \"78. Powers of the Commissioner (Appeals) not to include powers to set aside the assessment. 78.1 Under the existing provision contained in subsection (1) of section 251 of the Income-tax Act, in an appeal filed before a Commissioner (Appeals) against an order of assessment, the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by him, after making such further enquiry as may be necessary. With a view to help bringing about an early finalisation to the assessment and to avoid prolonging the process of litigation, the Act has amended section 251 so as to provide that, in an appeal filed before the Commissioner (Appeals), against an order of assessment, the Commissioner (Appeals) may not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment. The Commissioner Printed from counselvise.com I.T.A. No. 2532/Mum/2025 8 (Appeals) continues to have the powers under section 250 of making further inquiry, or directing the Assessing Officer to make further inquiry and report the result of the same to him, which can be made use of in appeals needing further enquiry or gathering of additional facts or evidence. 78.2 This amendment will take effect from 1st June, 2001 [Section 83]” 6. A simple comparison of the amended provision would show that the ld. CIT(A) can simply set aside the assessment if he wishes to but cannot give any directions as is clear from the aforementioned provisions and the relevant clauses of the Finance Bill and also from the memorandum explaining the Finance Bill. 6.1. Secondly, this is not the case where the AO has made addition u/s 68 of the Act as unexplained cash credit and the onus is upon the assessee to prove the identity, genuineness of the transactions and creditworthiness of the lenders. 6.2. Thirdly, when the facts have been captured by the AO and also by the ld. CIT(A) and these facts have never been disputed by the assessee, there was no need to set aside the assessment because the only issue which needs to be decided is the applicability of the provisions of Section 28(iv) of the Act. For this proposition, we draw support from the decision of the Hon’ble High Court of Delhi in the case of CIT vs. Sony Mobile Communications [2019] 104 CCH 0355 Del HC. The relevant observations of the Hon’ble High Court read as under:- “11. The Revenue’s only argument is that for determining the comparables, ITAT relied on the TP analysis conducted by the PO and that such an exercise was based on application of the \"bright line\" test, which has since been discarded. The allied submission is that the ITAT should have remitted the entire matter for fresh consideration by the TPO. 12. Having gone through the entire record, the court is of the opinion that the revenue's arguments are insubstantial and unmerited. There is no per se rule that in every case, the ITAT had to necessarily remit each matter. Given that the materials in the form of reports and documents were available with the ITAT, that the tribunal itself carried out the analysis, based on the record, of the facts which were disclosed before the TPO, does not result in any credence to the revenues complaint that it was not given sufficient opportunity. This court notices that the matters were re- examined by the ITAT itself in Sony Ericsson, and in view of the further circumstance that the remit was pending for 3 years, the revenue's arguments have no force.” Printed from counselvise.com I.T.A. No. 2532/Mum/2025 9 7. As mentioned elsewhere, the quarrel revolves around the applicability of the provisions of Section 28(iv) of the Act, which reads as under:- “(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to income-tax under the head “profits and gains of business or profession.” 8. In our considered opinion, this provision is not applicable on the facts of the case inasmuch as the assessee is having income from salary, dividend and other income during the year. These facts have been captured by the AO in the reasons recorded for reopening the assessment. Thus, neither the assessee has any business nor he is engaged in the profession. The decision of the Hon’ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. Reported in 404 ITR 1, squarely applies to the facts of the case wherein, the Hon’ble Supreme Court in the context of Section 28(iv) of the Act has held as under:- “10. The term \"loan\" generally refers to borrowing something, especially a sum of cash that is to be paid back along with the interest decided mutually by the parties. In other terms, the debtor is under a liability to pay back the principal amount along with the agreed rate of interest within a stipulated time. 11. It is a well-settled principle that creditor or his successor may exercise their \"Right of Waiver\" unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. The waiver may be a partly waiver i.e., waiver of part of the principal or interest repayable, or a complete waiver of both the loan as well as interest amounts. Hence, waiver of loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee. The short but cogent issue in the instant case arises whether waiver of loan by the creditor is taxable as a perquisite under Section 28 (iv) of the IT Act or taxable as a remission of liability under Section 41 (1) of the IT Act. 12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below:— '28. Profits and gains of business or profession.— The following income shall be chargeable to income-tax under the head \"Profits and gains of business profession\",— ** ** ** (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; ** ** **' Printed from counselvise.com I.T.A. No. 2532/Mum/2025 10 13. On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act.” [Emphasis supplied] 9. Most importantly, the loan transaction between IBHFL and the corporate entities of RADAG and Shri Harish Fabiani Group are the transactions between body corporate being separate legal entities and the investment in the OCDs/CCDs by the other entities of RADAG and Shri Harish Fabiani Group in the entities alleged to be controlled by the assessee, are again transactions between distinct legal entities and it is a settled law that a body corporate is a separate and distinct legal entity from its shareholders. For this proposition, we draw support from the decision of the Hon’ble Supreme Court in the case of Mrs. Bacha F Guzdar v. CIT [1955] 27 ITR 1 (SC), wherein the Hon’ble Supreme Court interalia held as under:- “It was argued by Mr. Kolah on the strength of an observation made by Lord Anderson in Commissioners of Inland Revenue v. Forrest [1924] 8 Tax Cas. 704 at 710that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word \"assets\" in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the articles; of association, to declare that dividends should be, distributed out of the profits of the company to the shareholders but the interest of the shareholder either Printed from counselvise.com I.T.A. No. 2532/Mum/2025 11 individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders.” 10. From the above decision of the Hon’ble Supreme Court, it is clear that Section 28(iv) of the Act applies only if the benefit is arising in some other form other than the shape of money and that too such benefit must arise from the business and on the facts discussed hereinabove, there is no benefit which has arisen in some other form other than shape of money in the exercise of business so as to attract Section 28(iv) of the Act. 11. Considering the facts of the case in totality in light of the decisions of the Hon’ble Supreme Court (supra), we direct the AO to delete the impugned addition of Rs. 510 Crores. 12. Since we have directed to delete the addition, other issues raised by the assessee are left open. 13. In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 5th August, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 05/08/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs Printed from counselvise.com I.T.A. No. 2532/Mum/2025 12 आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "