Shri Manish Vij vs Assistant Commissioner Of Income Tax

Per Mahavir Singh, Vice President:

This appeal by the assessee is directed against the order of learned CIT(Appeals)-30, New Delhi dated 31^st December, 2025. Assessment in this case was made by the ACIT, Central Circle-32, Delhi vide order dated 22^nd March, 2022 passed under Section 147 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2015-16.

The first issue on jurisdiction relates to reopening of assessment under Section 147 read with Section 148 of the Act and consequent assessment on the income other than the income alleged to have escaped assessment, which is not the subject matter of reasons for reopening under Section 147 of the Act. For this, the assessee has raised following ground Nos.1 & 2:-

At the outset, learned Counsel for the assessee took us through the assessment order which is enclosed in assessee’s paper book pages 43 and 44, and he read out the relevant paragraph No.4 as under:-

Subsequently, learned Counsel for the assessee took us through the reasons recorded which are enclosed at pages 11 and 12, and he particularly read out paragraph Nos.5 and 6 of the reasons recorded which are at page 12 and read as under:-

Learned Counsel pointed out that the reasons recorded are for escapement of commission income as the assessee was identified as exit provider and not beneficiary of loss or profit and hence, commission was to be added to income. He explained the facts that the entire basis of reopening was the allegation that the assessee might have earned commission income relatable to the amount of ₹1,79,35,696/- as exit provider/no sale and not beneficiary of loss or profit on alleged accommodation entries in the form of bogus long term capital gain/loss through penny stock transactions. However, in the reassessment order itself, the Assessing Officer has failed to establish the core allegation forming the foundation of the recorded reasons, viz., there is no finding that the specific transactions undertaken by the assessee were sham or fictitious. No material has been brought on record to show any commission earned as exit provider on these alleged accommodation entries of ₹1,79,35,696/- and nothing adduced which could show that the assessee participated as exit provider and no independent enquiry has been conducted with the broker, stock exchange or the assessee to substantiate the allegation. He further submitted that the assessment order merely relies upon general information and third party statements without finding any direct nexus with the assessee. The learned Counsel for the assessee further submitted that without prejudice to the above, it is submitted that the Assessing Officer having failed to conclusively establish the alleged penny stock/accommodation entry/exit provider/commission transaction and has proceeded to make addition under Section 68 by treating the amount as unaccounted income adjusted through bogus capital loss. The addition so made is not the income for which the assessment was reopened, but is an altogether different allegation and head of income. He submitted that it is a settled position of law that if the income for which the assessment was reopened is not assessed, the reassessment does not survive, the Assessing Officer cannot make additions on other issues during reassessment proceedings.

In view of the above, learned Counsel for the assessee argued that the issue now stands covered by the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs. CIT (2011) 336 ITR 136 (Del). It was contended that the reassessment would be invalid and without jurisdiction if the foundational reason for reopening fails and this issue has been considered unanimously by various High Courts apart from Hon'ble Jurisdictional High Court cited above in the case of Ranbaxy Laboratories Ltd. (supra) and CIT Vs. Jet Airways (I) Ltd. – [2011] 331 ITR 236 (Bom), PCIT Vs. Meenakshi Overseas (P) Ltd. – [2017] 395 ITR 677 (Del) and PCIT Vs. Mohamed Juned Dadani – [2014] 355 ITR 172 (Guj).

When these facts were confronted to the learned Senior DR, she submitted that although there should have been disallowance of loss as the assessee is identified as exit beneficiary of loss or profit and accordingly, the addition should have been made. But only the nomenclature of commission added cannot demolish the assessment. She argued that the reasons recorded are very clear and unambiguous and has been made rightly on the same income.

We have heard the rival submissions and perused the material placed before us. We noted the fact that the assessee was identified as exit provider and not beneficiary of loss or profit and hence, commission was added to its income. We have also gone through the reasons recorded and the facts and noted that the case was reopened for the purpose that assessee was identified as exit provider and not beneficiary of loss or profit and accordingly, commission income should have been added instead of addition made under Section 68 of the Act as unexplained cash credit. From the above reasons, we are of the view that the assessee's case is squarely covered by the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. (supra) and also CIT Vs. Jet Airways (I) Ltd. (supra), PCIT Vs. Meenakshi Overseas (P) Ltd. (supra) and PCIT Vs. Mohamed Juned Dadani (supra). Hence, we quash the reassessment proceedings as invalid and allow ground Nos.1 and 2 of the appeal of the assessee.

Since we have already adjudicated the issue of assumption of jurisdiction and quashed the reassessment proceedings under Section 147 read with Section 148 of the Act, as above, the other grounds raised by the assessee have become academic and need no adjudication.

In the result, the appeal of the assessee is allowed.