WAZEERA SALEH MITHIBORWALA,MUMBAI V. DCIT CIRCLE 35(3) MUMBAI, MUMBAI

ITA 484/MUM/2025

AI Insights

The case involves Wazeera Saleh Mithiborwala, the appellant, who challenged the reassessment order passed by the Deputy Commissioner of Income Tax, Circle \\u2013 35(3), Mumbai, for the assessment year 2014-15. The reassessment was based on information that the appellant was involved in accommodation entry transactions of bogus long-term capital gains. The primary legal contention was the absence of a notice under section 143(2) of the Income Tax Act, 1961, which the appellant argued was essential for the validity of the reassessment proceedings. The Tribunal, referencing the Supreme Court's decision in CIT vs Laxman Das Khandelwal, held that the absence of such a notice rendered the reassessment proceedings invalid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779587 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 23-01-2025
• Other Referred Cases: CIT vs Laxman Das Khandelwal, ACIT vs Hotel Blue Moon
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Assessee Lawyers: NISHIT GANDHI
• Keywords: Opportunity of being heard; Reassessment proceedings; Capital Gains; Principle of natural justice; Assessment record; Validity of assessment; Bogus
• Section: 148; 144; 143(3); 68; 131

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.484/MUM/2025 (Assessment Year 2014-15) Wazeera Saleh Mithiborwala, 1001/1002 Natura, Tapovan, Co-op. Housing Society, J.K. Mehta Marg, Santacruz West, Mumbai - 400054 PAN: ACGPM5141G ............... Appellant v/s Deputy Commissioner of Income Tax, Circle – 35(3), Mumbai ……………… Respondent Assessee by : Shri Nishit Gandhi, Advocate Revenue by : Shri Swapnil Choudhary, Sr. DR Date of Hearing – 06/10/2025 Date of Order - 15/10/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 25/11/2024, 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 2014-15. 2. In this appeal, the assessee has raised the following grounds: - Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 2 “1.1 In the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (\"the CIT(A)\" for short) erred in confirming the action of the Learned Deputy Commissioner of Income Tax - 35 (3), Mumbai [\"the AO\" for short), in passing the assessment order u/s 143 (3) r.w.s. 147 of the Income Tax Act, 1961 [\"the Act\" for short) in gross violation of the principles of Natural Justice. 1.2 While doing so the Ld. CIT(A) failed to appreciate that: (a) The Order is passed by him without affording any fair, reasonable and sufficient opportunity of being heard to the Appellant; (b) The Assessee (Appellant) was not aware of the transfer of the appeal to the CIT(A), NFAC and therefore no submissions could not be made; and; (c) Even the assessment was framed in gross violation of principles of Natural Justice and on the basis of certain material never confronted to the Appellant and the same deserves to be quashed; 1.3 It is therefore submitted that the order passed by the Ld. CIT(A) affirming the order of the Ld. AO deserves to be quashed. ON JURISDICTION AND REASSESSMENT: 2.1 In the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in affirming the assessment order despite the fact that no Notice u/s 143(2) of the Act has been issued on the Assessee by the AO within the time provided under the Act and as such the assessment order passed by the AO u/s 144 r.w.s. 147 of the Act is bad in law and void for want of jurisdiction. 2.2 In the facts and circumstances of the case and in law, the order passed by the Ld. AO us 144 of the Act is bad in law since the necessary conditions for invocation of the said section are not fulfilled in the present case and the Ld. CIT(A) erred in confirming such an order. Without prejudice to the above, in the facts and circumstances of the case and in law, the Ld. AO who has framed the present assessment had no jurisdiction at all to do so and as such the assessment order passed by him is void and bad in law for want of jurisdiction since neither his authorization by the CIT or by the Board to frame an assessment has been provided to the Appellant nor has he so mentioned it in his order. 2.4 In the facts and circumstances of the case and in law, the re-assessment order passed by the Ld. AO u/s 143(3) r.w.s. 147 of the Act and as affirmed by the Ld. CIT(A) is bad in law since the necessary pre-conditions for initiation as well as completion of a re-assessment as contemplated u/s 147 / 148 of the Act are not fulfilled in the present case and as such the order deserved to be quashed for want of jurisdiction. While doing so the Ld. CIT(A) failed to appreciate that: Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 3 (a) The re-assessment was initiated on the Assessee simply on the basis of information received from investigation wing without any application of mind thereto by the AO and therefore invalid; (b) A copy of the actual reasons as recorded by the AO was not provided to the Appellant despite requests before framing the assessment and therefore the entire proceeding u/s 148 is vitiated; and; (c) Since, no such reasons have been reproduced even by the AO himself in his impugned assessment order, it appears no reasons were recorded prior to the issue of Notice u/s 148; 2.6 It is submitted that in the facts of the present case, the re-assessment framed by the AO deserves to be quashed. ON MERITS: 3.1 In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in taxing an amount of Rs.5,45,69,581/- u/s 68 of the Act simply on the basis of surmises and conjectures and thereby denying the claim for exemption u/s 10(38) of the Act on sale of two scrips through the Bombay Stock Exchange. 3.2 While doing so the Ld. CIT(A) failed to appreciate that: (a) The sale of shares was rightly claimed as exempt long term capital gains w/s 10(38) which was earned on sale of shares through Bombay Stock Exchange (BSE), a recognized stock exchange; (b) The sale as well as purchase of shares is evidenced by various documents including the broker notes from registered brokers, bank statements, etc.; (c) There is no allegation whatsoever, that the shares sold by the Appellant were purchased by tainted parties as mentioned in the list reproduced in the order, neither has the AO produced any evidence in this regard to manifest that the transactions carried out by the Appellant were bogus; (d) In any case, the entire addition is based simply on certain unconfronted statements of some unrelated third parties before the Department and other Authorities in some unconnected proceedings and therefore unsustainable; (e) Neither any investigation nor any proceedings whatsoever have ever been initiated by Securities and Exchange Board of India (SEBI) against the brokers or the Appellant as regards the impugned transactions; and; (f) The AO has himself accepted in his order as also accepted in the report reproduced in his order at pg. 13 of his assessment order that majority of the transactions in the sale of the impugned scrips were genuine and only a part of the same were termed as tainted in the said report and therefore there was no basis to assume that the transactions of the Appellant as ingenuine. Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 4 3.3 Without prejudice to the above, in the facts and circumstances of the case and in law, even otherwise no addition could have been made and no income could be taxed unless a specific head is assigned to it as contemplated u/s 14 of the Act. 3.4 In view of the above, it is submitted that the addition so made by the AO and as confirmed by the Ld. CIT(A) be deleted.” 3. During the hearing, the learned Authorized Representative (“learned AR”) wishes to first argue Ground no.2.1, challenging the validity of assessment proceedings in the absence of issuance of notice under section 143(2) of the Act. 4. The brief facts of the case as emanating from the record are: The assessee is an individual and for the year under consideration filed her return of income on 31/07/2014, declaring a total income of INR 1,24,46,480. Pursuant to the information received from the Directorate of Investigation that the assessee is a beneficiary of the accommodation entry transaction of bogus long-term capital gains, notice under section 148 of the Act was issued on 20/09/2016 and proceedings under section 147 of the Act were initiated. In response to the notice issued under section 148 of the Act, the assessee filed her return of income on 20/12/2017, declaring income similar to the original return of income. Thereafter, the assessee was asked to submit the details in respect of the purchase and sale of shares during the relevant financial year. However, the assessee did not furnish any details in response to the same. Further, the assessee also did not respond to the summons issued under section 131 of the Act. Accordingly, in absence of any details being furnished by the assessee, the Assessing Officer (“AO”) proceeded to complete the Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 5 assessment on a best judgment basis and vide order dated 29/12/2017 passed under section 144 read with section 147 of the Act made an addition of INR 5,45,69,581 being the sale proceeds of the sale of alleged penny stock under section 68 of the Act. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us. 5. We have considered the rival submissions and perused the material available on record. It is the plea of the assessee that in the present case, the assessment under section 144 read with section 147 of the Act is null and void as no notice under section 143(2) of the Act was issued and served upon the assessee. In order to check the veracity of the contention of the assessee, time was granted to the Revenue to obtain a report from the Jurisdictional Assessing Officer regarding the issuance of the notice under section 143(2) of the Act, after examination of the assessment record. During the hearing on 06/10/2025, the learned Departmental Representative (“learned DR”) furnished the letter dated 30/09/2025 by the Assistant Commissioner of Income Tax, Circle-42(3)(1), Mumbai, submitting as follows: - *** This space has been left blank intentionally. P.T.O *** Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 6 Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 7 Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 8 6. Thus, the Revenue neither could produce the notice issued under section 143(2) of the Act nor could it provide the details of the said notice before us. In addition to the above, learned DR submitted that issuance of notice under section 143(2) of the Act is immaterial since the assessee had participated in the assessment proceedings and therefore non-issuance of notice under 143(2) of the Act will not invalidate the assessment proceedings and the consequent assessment order in view of section 292BB of the Act. 7. We find that a similar issue came up for consideration before the Hon’ble Supreme Court in CIT vs Laxman Das Khandelwal, reported in [2019] 417 ITR 325 (SC), wherein the Hon’ble Supreme Court after noting the importance of issuance of notice under section 143(2) of the Act, as laid down in its earlier decision rendered in ACIT vs Hotel Blue Moon, reported in [2010] 321 ITR 362 (SC), held that for section 292BB to apply, section 143(2) notice must have emanated from the department and it is only infirmities in the manner of service of notice that the section seeks to cure and it is not intended to cure the complete absence of notice under section 143(2) of the Act itself. The relevant observations of the Hon’ble Supreme Court are as follows: - “8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon's case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 9 the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings rendered. by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.” 8. Therefore, in view of the aforesaid decision of the Hon’ble Supreme Court, we are of the considered view that the entire reassessment proceedings under section 144 read with section 147, in the present case, stood vitiated as the AO lacked jurisdiction in the absence of notice under section 143(2) of the Act. Hence, the assessment order passed under section 144 read with section 147 of the Act is quashed. As a result, Ground no.2.1 raised in the assessee’s appeal is allowed. 9. As we have quashed the assessment order for this short reason, the other issues raised in this appeal are kept open. 10. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 15/10/2025 Sd/- Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 15/10/2025 Prabhat Printed from counselvise.com ITA No.484/Mum/2025 (A.Y. 2014-15) 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 Printed from counselvise.com "