SMT NIRAKUMARI VIRENDRA BAJAJ,MUMBAI V. ITO, WARD-17(2)(1), MUMBAI

ITA 6177/MUM/2024

AI Insights

The case involves an appeal by Nirakumari Virendra Bajaj against the reassessment order for the Assessment Year 2018-2019. The reassessment was initiated by the Income Tax Officer based on information from searches related to the Kushal Group and Alora Trading Company, which allegedly involved the assessee in price rigging and bogus accommodation entries. The primary legal contention was the validity of the reassessment notice issued under Section 148 of the Income Tax Act, 1961, which the assessee argued was beyond the statutory time limit and thus invalid. The Tribunal examined the procedural adherence to the statutory provisions concerning the issuance of reassessment notices and found discrepancies that warranted the quashing of the notice and the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314692 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Reassessment proceedings; Reopening of assessment; Capital Gains; Search and seizure; Accommodation entries; Earning of tax free income; Bogus
• Section: 147

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “J (SMC)” BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 6177/MUM/2024 (Assessment Year: 2018-2019) Nirakumari Virendra Bajaj Flat No.D2, 5th Floor, Jolly Highrise Apartment, B Bldg., Bandra, Mumbai – 400050. Maharashtra. [PAN:AIIPB7000K] .…………. Appellant Income Tax Officer Ward 17(2)(1), Mumbai Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051. Maharashtra. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Reepal Tralshawala Shri Asif Karmali Date Conclusion of hearing Pronouncement of order : : 24.02.2025 07.05.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 04/10/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 24/01/2024, passed under Section 147 read with Section 144B of the Act for the Assessment Year 2018-2019. 2. When the appeal was taken up for hearing, the Learned Authorized Representative for the Assessee pressed into service Ground No.A (1)(a) to (d) raised in the present appeal challenging the validity of ITA No.6177/Mum/2024 Assessment Year 2018-2019 2 the reassessment proceedings which reproduced as under: “A. Reopening of assessment is bad in law and liable to be quashed 1. The Ld. NFAC [CIT(A)] has erred in dismissing the grounds relating to reopening of the assessment in para 6 of the order without appreciating that: a. notice issued us. 148 of the Act dated 20.04.2022 is beyond 3 years from the relevant AY 2018-19 and the alleged income escaping assessment is less than Rs.50 lakhs, and this ground taken is rejected in para 4.1 of the order by holding that the same is general in nature, however, the ground taken is not general and is specific and hence, the reopening of the assessment is bad in law and liable to be quashed; b. without prejudice to the above, even otherwise, there is NO income that has escaped assessment and hence, the reopening of the assessment is bad in law and liable to be quashed. c. without prejudice to the above, the Ld. NFAC [CIT(A)] failed to consider the grounds raised in respect of failure to obtain sanction u/s. 151 of the Act and/or if taken, the same is beyond jurisdiction and/or mechanical approval given without application of mind and hence, the reopening of the assessment is bad in law and liable to be quashed; d. without prejudice to the above, the notice u/s.148A(b) and u/s.148 of the Act is issued by jurisdictional AO whereas the notice ought to be issued under faceless regime and not by jurisdictional AO and hence, even on this ground, the reopening of the assessment is bad in law and liable to be quashed.” 3. The Authorized representative for the Assessee submitted that the reassessment proceedings have been initiated in violation of provisions contained in Section 149(1)(a)/(b) of the Act. As per the provisions contained in Section 149(1)(a) of the Act, no notice under ITA No.6177/Mum/2024 Assessment Year 2018-2019 3 Section 148 of the Act could be issued beyond period of 3 years from the end of the relevant assessment year where the escapement of income is less than 50 lakhs. In the present case, the alleged escapement of income even as per the Assessment Order, dated 24/01/2024, passed under Section 147 read with Section 144B of the Act is INR.29,56,149/- which is less than threshold limit of INR.50 lakhs. Since, notice under Section 148 of the Act, dated 20/04/2022, was issued after expiry of three years from the end of the relevant assessment year (i.e., Assessment Year 2018-2019), the same was bad in law having been issued in contravention of the express provisions contained in Section 149(1)(a)/(b) of the Act. 4. Per contra the Learned Departmental Representative relied upon the orders passed by the authorities below. 5. Having considered the rival submissions and on perusal of record, we find merit in the contention advanced by the Learned Authorized Representative for the Assessee. 5.1. Section 149 of the Act deals with the time limit for issuance of notice under Section 148 of the Act and the same was substituted by the Finance Act, 2021 (w.e.f. 01/04/2021). As per the provisions contained in the substituted Section 149 of the Act, notice under Section 148 of the Act after the laps of three years from the end of the relevant assessment year can be initiated only in a case where income chargeable to tax which has escaped assessment or is likely to escape assessment is INR.50 lakhs or more. 5.2. We find that notice under Section 148A(b) of the Act was issued to the Assessee on 27/03/2022. The relevant extract of the same reads as under: “In this case the information is flagged in the system (INSIGHT) for AY 2018-19 in accordance with the risk management strategy formulated by the Board. The information has been received from directorate of investigation, unit 1(1)& unit-1(3), Ahmedabad As per ITA No.6177/Mum/2024 Assessment Year 2018-2019 4 information received from the unit-1(1), Ahmedabad a search and seizure action us. 132 of the It Act 1961 in the case of Kushal Group of Ahmedabad was carried out by investigation directorate, Ahmedabad on 05.02.2019. During the course of search action on Kushal group, various incriminating materials were seized. On investigation of the seized materials it is established that Kushal Group was involved in price rigging and providing bogus accommodation entries in the form of bogus Long Term Capital Gain/Loss and Short Term Capital Gain/Loss. The assessee Nira Kumari Virendra Bajaj is one of the beneficiaries of the same of the amount to the tune of Rs.13,41,624/-. Further, as per information received from unit-1(3), Ahmedabad a search and seizure action in the case of Sankalp Group of Ahmedabad was carried out by investigation directorate. Ahmedabad on 30.10.2018 During the course of investigation, a penny scrip Viz. M/s Alora Trading Company Limited was found to be involved in manipulation in trade by way of complex web of prearranged or artificial transactions carried out to book bogus LTCG/STCL entries to the beneficiaries. The assessee Nira Kumari Virendra Bajaj is one of the beneficiaries of the same also to the tune of Rs.2,12,200/-. 3. On perusal & verification of the return of income of the assessee for AY 2018-19, it is seen that assessee has filed ITR-3 declaring total income of NIL. Therefore, the above information suggests that income chargeable to tax has escaped assessment in the case of the assessee.” 6. Thereafter, order was passed under Section 148A(d) of the Act on 19/04/2022 whereby the Assessing Officer concluded that the notice under Section 148 of the Act should be issued in the case of the Assessee for the Assessment Year 2018-2019 concluding as under: “7. Having satisfied myself that the proviso to section 148 does not come in the way of issuance of Notice u/s 148 of the I.T. Act, I have examined as to whether the assessment is needed in this case. The assessee in its reply has stated that he has not indulged in any price rigging or bonus accommodation entries and all transactions are genuine. From the details submitted by the assessee it is not ascertainable that the assessee has not involved in taking bogus accommodation entries with the Kushal Group and M/s. Alora Trading Company Further, in the ROI filed by the assessee, he has claimed the short term capital loss of Rs. 33,75,56/- and has shown exempt income. Moreover, information flagged in the case of the assessee itself ITA No.6177/Mum/2024 Assessment Year 2018-2019 5 suggest that the assessee is one of the beneficiaries of the accommodation entries provided by the Kushal Limited & M/s Alora Trading Company in the form of Long Term Capital Gains/Losses and Short Term Capital Gain/Loss. Therefore the explanation and the documents submitted by the assessee do not conclusively preclude the suggestion based on information available with the AO that the income chargeable to tax has escaped assessment. Thus it is logical to conclude that the assessee has no proper explanation with respect to the above mentioned escapement of income in his case for AY 2018-19. 8. In light of the above facts and on the basis of material available on record, I am of the view that the case of Nira Kumari Virendra Bajaj (PAN: AIIPB7000K) is a fit case for issuance of notice uis. 148 of the Act for A.Y. 2018-19 based on the above information. 9. This order is passed with the prior approval of the specified authority.” 7. Thereafter, Assessment Order, dated 24/01/2024, was passed under Section 148 of the Act whereby the Assessing Officer had made aggregate addition of INR.29,56,149/- in the hands of the Assessee under Section 69A of the Act consisting of the following: A. Sale of Shares of Kushal Limited (i) Long Term Capital Loss : INR.18,96,092/- (ii) Short Term Capital Loss : INR. 1,51,354/- (iii) Short Term Capital Gain : INR. 6,95,013/- B. Sale of shares of Alora Trading Company (i) Short Term Capital Loss of : INR. 2,13,690/- 8. On perusal notice issued under Section 148A(b) of the Act, Order passed under Section 148A(d) of the Act and Assessment Order passed under Section 147 read with Section 144B of the Act it is evident that in the present case income chargeable to tax which had escaped assessment or which was likely to escaped assessment was less that INR.50 lakhs. It is admitted position that notice under Section 148 of the Act was issued on 20/04/2022. 3 years from the ITA No.6177/Mum/2024 Assessment Year 2018-2019 6 end of the relevant assessment year lapsed on 31/03/2022. Since, the notice under Section 148 of the Act was issued after the expiry of 3 years from the end of the relevant previous years (i.e., Assessment Year 2018-2019), the same is quashed as having been issued in violation of provision contained in under Section 149(1)(a)/(b) of the Act. Accordingly, notice, dated 20/04/2022, issued under Section 148 of the Act and Assessment Order, dated 24/1/2024, passed under Section 147 read with 144B of the Act are quashed as being bad in law. In terms of aforesaid, Ground No.A(1)(a) to (d) raised by the Assessee are allowed and therefore, Ground No.B(2)(a)(d) raised by the Assessee are dismissed as having being rendered infructuous. 9. In result, in terms of paragraph 8 above, the present appeal preferred by the Assessee is allowed. Order pronounced on 07.05.2025. Sd/- Sd/- (Om Prakash Kant) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated :07.05.2025 Milan,LDC ITA No.6177/Mum/2024 Assessment Year 2018-2019 7 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "