2025 (7) TMI 1215 - AT - Income Tax

Validity of Reopening u/s 148A - period of limitation - application of TOLA - Notice issued by JAO instead of FAO - effect of non disposal of objections - HELD THAT - We find that objections were raised by the assessee on merits as well as on law point. These were not disposed off by the AO during the course of reopening or reassessment by the JAO or FAO and clearly violative of case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT . We are therefore inclined to agree with the submission of the Learned Authorized Representative that reopening initiated by the Assessing Officer in this regard is not tenable in law. We also find support from the Judgment of Vivek Saran Agarwal 2023 (10) TMI 564 - ALLAHABAD HIGH COURT in which it was held that objection can be raised even during the reassement proceedings. Accordingly we find that the reopening is not tenable in law. Validity of reopening initiated by JAO instead of FAO relying upon Judgment in the case of Hexaware Technologies Ltd 2024 (5) TMI 302 - BOMBAY HIGH COURT . However in this regard we find that the said issue is pending before the Hon ble Supreme court and has not attained finality. Moreover we have already quashed reopening on other four grounds as mentioned in forgoing paragraphs this issue of JAO and FAO is merely academic in nature in the appeal and does not require further adjudication because reopening is already quashed.

Summary

ISSUES:

Validity and limitation of reopening assessment under Section 148/148A of the Income Tax Act, 1961 for Assessment Year 2015-16.Whether reopening constitutes a change of opinion and is therefore invalid.Whether the Assessing Officer complied with procedural requirements including granting personal hearing before passing order under Section 148A(d).Reliance on SEBI investigation and reports as credible evidence to justify addition/disallowance of Rs. 4,96,87,796/- on account of reversal trades in illiquid stock options.Validity of additions/disallowance made on basis of suspicion, third-party statements, and without proof of cash trail.Applicability of Supreme Court judgment in Rajeev Bansal and related case law on limitation and reopening for AY 2015-16.Whether penalty under Section 271(1)(c) and interest under Sections 234A, 234B & 234C are justified.Whether objections raised by the assessee during reassessment proceedings were properly disposed of by the Assessing Officer.Whether reopening conducted by Junior Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO) is valid.

RULINGS / HOLDINGS:

The reopening under Section 148 r.w.s. 148A for AY 2015-16 is time barred as the last date for issuance of notice was 31.03.2022 and the notice dated 27.07.2022 was issued thereafter; the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) does not extend limitation for AY 2015-16. The reopening is accordingly quashed.The reopening constitutes a change of opinion on the same facts already examined in the original assessment order dated 21.12.2017, and is therefore invalid under settled legal principles including the rulings in Kelvinator of India Ltd. and Seema Gupta.The order under Section 148A(d) dated 27.07.2022 was passed without granting personal hearing despite a specific request by the assessee, rendering the order and consequent notice invalid as per the Bombay High Court judgment in Nikhil Chandrakant Dharia.SEBI's investigative findings and adjudication orders are credible evidence establishing that the reversal trades were non-genuine and manipulative, justifying the reopening and addition under Section 68; however, since reopening itself is quashed on limitation grounds, this issue is rendered academic.The addition of Rs. 4,96,87,796/- is based on credible evidence including SEBI reports and investigation wing data, and not merely on suspicion or third-party statements; however, as reopening is quashed, this ground is also rendered academic.The Supreme Court judgment in Rajeev Bansal applies squarely to AY 2015-16, holding that notices issued on or after 1 April 2021 for this year are barred by limitation and must be dropped; this principle is reinforced by several High Court and Tribunal decisions cited.Interest under Sections 234A, 234B & 234C is to be recalculated in accordance with the appeal effect; penalty under Section 271(1)(c) is premature and requires adjudication only after levy.The objections raised by the assessee during reassessment proceedings were not disposed of properly by the Assessing Officer, violating the requirement for a speaking order as per GKN Driveshafts (India) Ltd., rendering the reassessment invalid.The issue of reopening by JAO instead of FAO is academic as the reopening is quashed on other grounds; the matter is pending before the Supreme Court and does not require adjudication in this appeal.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, particularly Sections 148, 148A, 149, and 151, and interpreted them in light of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), as well as the Supreme Court judgments in Union of India vs. Ashish Agarwal and Rajeev Bansal, which clarified the limitation period for reopening assessments for AY 2015-16.The Court relied on established precedent that reopening on the basis of a mere change of opinion is impermissible, citing Kelvinator of India Ltd. and Seema Gupta, emphasizing the need for fresh material or failure to disclose primary facts to justify reassessment.The procedural requirement of granting a personal hearing before passing an order under Section 148A(d) was underscored, referencing the Bombay High Court ruling in Nikhil Chandrakant Dharia, which mandates application of mind and opportunity to the assessee.The Court acknowledged SEBI's statutory investigative and adjudicatory powers under the SEBI Act, 1992, recognizing SEBI as a fact-finding authority whose findings carry substantial weight in tax assessments involving stock market manipulations.The Court noted the failure of the Assessing Officer to dispose of the assessee's objections seriatim and pass a speaking order, violating the principle laid down in GKN Driveshafts (India) Ltd., which aims to reduce litigation and ensure fairness in reassessment proceedings.The Court observed that the issue of reassessment initiated by JAO instead of FAO is sub judice before the Supreme Court and hence did not decide on this point, given the quashing of reopening on limitation and procedural grounds.The Court directed recalculation of interest in accordance with the appeal effect, following the Supreme Court's decision in Anjum M.H. Ghaswala, and held penalty proceedings premature without levy.