Reassessment Quashed as it Was Based on a Change of Opinion on Old Information.

Issue

Can an Assessing Officer (AO) validly initiate reassessment proceedings based on information that was not only available but was also specifically examined during both the original scrutiny assessment and a subsequent search assessment under Section 153A?

Facts

The assessee’s original scrutiny assessment for the Assessment Year 2012-13 was completed.
A search was conducted on a group concern, leading to a separate assessment on the assessee under Section 153A, which was also completed.
After these two assessments, the AO issued a reassessment notice under Section 147. The basis for this reopening was information about a ₹25 crore share application money transaction.
The assessee provided documentary proof showing that the very same transaction and all related details had been called for, submitted, and examined by the AO during both the initial scrutiny assessment and the later search assessment proceedings.

Decision

The High Court ruled in favour of the assessee and quashed the reopening notice.
It held that the reopening was based on “stale information” that was already part of the assessment record and had been subject to the AO’s scrutiny on two prior occasions.
The court concluded that this was a clear case of a “change of opinion,” where a succeeding officer is attempting to review the same set of facts to arrive at a different conclusion, which is not a permissible ground for reopening a completed assessment.

Key Takeaways

“Change of Opinion” is Barred: An AO cannot reopen a concluded assessment merely because they have a different perspective on the same set of facts and materials that were available during the original proceedings.
No Review Power in the Guise of Reassessment: The power of reassessment is meant to tax income that has genuinely escaped assessment, not to give the AO a second chance to review or correct perceived errors in a completed assessment.
Information Must Be New: For a reopening to be valid, the “reason to believe” must be based on some new, tangible material that was not available or considered during the original assessment. Information already on file and examined does not qualify.

The Requirement for Prior Approval Under Section 153D is Limited to Search Assessments.

Issue

Does the mandatory requirement for prior approval from a senior authority under Section 153D, which applies to assessments made in consequence of a search, also extend to a standard reassessment proceeding initiated under Section 147 that happens to take place after a search assessment is completed?

Facts

The assessee’s assessment for the Assessment Year 2012-13 was first completed under Section 153A (assessment in case of search).
Subsequently, a separate proceeding for reassessment was initiated under Section 147 for the same year.
The assessee challenged this subsequent reassessment on the ground that it lacked the mandatory prior approval required under Section 153D.

Decision

The court ruled in favour of the revenue on this specific legal point.
It held that the expression “assessment” or “reassessment” referred to in Section 153D relates exclusively to assessments framed as a direct consequence of a search (i.e., under Section 153A or 153C).
A standard reassessment under Section 147 is a separate and distinct proceeding initiated due to “escapement of income,” not as a direct outcome of the search itself.
Therefore, the requirement for prior approval under Section 153D does not apply to an assessment order passed under Section 147.

Key Takeaways

Specific Application of Section 153D: Section 153D is a special provision that acts as a supervisory check only for assessments arising out of search and seizure operations. Its scope is not general.
Different Assessment Streams, Different Rules: The Income-tax Act provides for different types of assessments (regular, reassessment, search assessment), each with its own distinct procedural requirements. The rules of one do not automatically apply to the other.
Approval for Reassessment is Governed by Section 151: The procedural safeguard for a standard reassessment is the approval required under Section 151, not Section 153D.

IN THE ITAT DELHI BENCH ‘C’

Tremendous Mining And Minerals (P). Ltd

Deputy Commissioner of Income-tax

ANUBHAV SHARMA, Judicial Member
and S. Rifaur Rahman, Accountant Member

IT Appeal No. 157 (Delhi) OF 2023
[Assessment year 2012-13]

JULY 9, 2025

Ashwini Kumar and Ankur Aggarwal, CAs for the Appellant. Kailash Dan Ratnoo, CIT-DR for the Respondent.

ORDER

Anubhav Sharma, Judicial Member. – This appeal is preferred by the Assessee against the order dated 05.01.2023 of the Commissioner of Income-tax (Appeals)-23, New Delhi (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.CIT(A), Delhi-23/10303/2019-20 arising out of the appeal before it against the order dated 24.12.2019 passed u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the DCIT, Central Circle-3, Delhi (hereinafter referred to as the Ld. AO).

2. The original return of the assessee for AY 2012-13 was filed on 26.09.2012 declaring the income at Rs.9,000/- which was processed u/s 143(1) of the Act at the returned income and, subsequently, the case was selected under scrutiny through CASS and the regular assessment was completed on 23.03.2015 u/s 143(3) of the Act at the returned income. A search and seizure operation u/s 132 of the Act was conducted in the case of M/s Bhushan Steel Ltd. (BSL) group and its group concerns on 13.06.2014. The case of the assessee was also covered in operation u/s 132 of the Act. The assessee filed return u/s 153A of the Act on 07.07.2016 declaring the same income as filed u/s 139 of the Act. The assessment u/s 153A r.w.s. 143(3) for AY 2012-13 was completed on 13.12.2016 at an income of Rs.9,000/-. Then, based on the information received from Asstt. Director of Income-tax (Inv.), Unit-3(4), New Delhi, the case of the assessee was selected for reassessment by issuing a notice on 31.03.2019 u/s 148 of the Act. The sum and substance of the information as reflected in the assessment order was that the assessee was found to have received credit from M/s Jawahar Credit and Holdings Pvt. Ltd. amounting to Rs.25 crore by sale of 1,25,000 equity shares. During AY 2012-13, this company, Jawahar Credit and Holdings Pvt. Ltd. issued 3 lakh shares at Rs.200/- per share of face value of Rs.10/- each at a premium of Rs.190/- per share. As per the reasons recorded in the reopening, the company had not done any business activity and major part of the turnover is derived from miscellaneous income. In the reopening reasons, it was mentioned that the books of account and ITR analysis of Jawahar Credit and Holdings Pvt. Ltd. reveals that during the AY 2012-13 it had issued shares at a premium to Bhushan Steel group companies and individuals only for Rs.82.10 crores. The bank accounts of M/s Jawahar Credit and Holdings Pvt. Ltd. reveals that money obtained from the above mentioned group companies was immediately invested further in various other companies. Apart from these high value shares based capital account transaction, there were hardly any revenue account transactions, the investment were made mostly in BSL group companies including Rs.25 crores to Tremendous Mining & Minerals Pvt. Ltd. in FY 2011-12. The fund flow in respect of Tremendous Mining & Minerals Pvt. Ltd. was also examined. It was found that BSL and other BSL group companies had invested in M/s Jawahar Credit and Holdings Pvt. Ltd., which had subsequently invested in various companies including the assessee company. It was found that the companies which have invested in M/s Jawahar Credit and Holdings Pvt. Ltd. and the companies in which it had invested are registered at the same address and directors are also common. Summons were issued to these companies including the assessee company and also by e-mail, but, no response was received. Thus, the receipt of Rs.25 crores was considered to be an escapement of income chargeable to tax and, accordingly, the notice was issued. The assessee filed a reply explaining the receipt which was not found tenable and the AO made an addition of Rs.25 crores which has been sustained by the CIT(A). The relevant findings of the ld.CIT(A) in para 7 to 12 are as follows:-

“7. The appellant argued that the addition of the impugned amount was made in the case of M/s Jawahar Credits and Holding Pvt, Ltd. (Jawahar Credits) in the order dated 27.03.2015, The appellant further stated that the addition made by the Assessing Officer in the hands of. M/s Jawahar Credits has been deleted by the CIT(A) and therefore, the same addition cannot be made in the hands of the appellant.

8, The argument of the appellant are examined. It is seen that the Ld. CIT(A) in his order no.5/0126/2015-16 dated 25.03.2019 in the case of Jawahar Credits deleted the addition because he was of the view that. M/s Jawahar credit was only a conduit company for routing of funds and not the beneficiary. The relevant portion of the order of CIT(A) is reproduced as under-

“7.8 All these features as discussed in the foregoing paragraphs, 7.5 to 7.7 indicates that though the documentations are complete with respect to the investors and the appellant company, payments received and made through banking channels and other formalities are complete, however, inability to produce directors In the case Of Investor company, investment at such high premium without justification and having no net worth or reserves and surplus and immediate investment in appellant company after receiving the funds, which was further invested by the appellant company to other companies for such amount received, same address etc. shows that the appellant company and its investors, especially companies are nothing but a creation of paper companies to transfer its funds from Bhushan Steel Ltd. and other individuals related to them, to various companies as shown in flow chart, through the appellant company.

7.8 As stated earlier, there is no worth/reserve of the appellant company nor any business carried out, the investor companies and other persons are also not carrying out any visible business activity, therefore, this is nothing but routing of its funds by the Bhushan Steel Ltd. and its related parties where neither the investors and other persons nor the appellant company are ultimate beneficiary. The funds received were given to the other companies, as soon as it is received and the assets in the balance sheet is shown in the form of Investment in shares for the share application Money and premium thereon received. The appellant has also not given any cogent reasoning for the fund flow shown by the AO in his report

7.9 Therefore, looking to the facts and circumstances of this case where basic requirement to justify the identity, creditworthiness and genuineness of transaction has been prima facie established but looking to the fact and analysis as narrated above, these transactions are found to be for routing finances of M/s Bhushan Steel Ltd. and other persons, through appellant Company and it is just paper company where appellant is not the ultimate beneficiary because it has further passed on those funds to various companies as shown in the flow chart.

7.10 In view of above, It is to be stated that as per the practice and also referred seen in various cases, the said person (In this case appellant) charges the amount to provide such entries which is generally 2% of the total transactions. Therefore, considering that the appellant has been providing the facility to route these financial transactions, the 2% of the total amount is treated as undisclosed income of the appellant, not shown in Its turn of income. This comes to Rs. 1,47,00,000/-.

7.11 Since the details have been duly provided with respect to the. referred companies and the additions are out of the ambit of provisions of section 68 of the Act due to the reason that these investors companies are held to be just a paper company or conduit in the case of other investors for providing entries and routing the finances, therefore, the addition to the extent of Rs. 1,47,00,000/- is sustained for charges received in providing such entries, not disclosed by the appellant. For the balance amount, the appellant gets a relief.”

9. The above findings of the Id. CIT(A) is not contrary to the findings of the Assessing Officer in the present case. It is not a case wherein the same amount is added once again in the case of Jawahar Credit only, The present order of the Assessing Officer is the logical consequence to the order of the CIT(A) because he rightly held that the Jawahar Credit was not the beneficiary but only a conduit for routing the transaction. If that be so, then the addition needs to be made in the case of the appellant company because he has received Rs.25,00,00,000/- from the Jawahar Credit and is the beneficiary of such funds/money.

10. The appellant is a group company of Bhushan Steel Group and was found to be engaged in money laundering in a big way. The transaction of the appellant is basically part & parcel of organised financial crime wherein various modus operandi like bogus LTCG, bogus share capital etc. was employed to bring unaccounted money in the books of accounts. The money was routed through various entities to evade investigation. The transactions were camouflaged as that of share application like in the present case. The appellant company has -no regular business activity and its major turnover is reportedly derives from miscellaneous receipts.

11. In the present case, there is no justification whatsoever for charging very high share premium (Rs,190/- per share) against the face value of Rs.10/- per share. At no point of time in any of the proceedings, the appellant or any entity was able to establish the genuineness of the transaction. Further, Jawahar Credit could not explain the transaction when opportunity was provided to them. If the transactions are genuine, in that case the directors of the companies concerned has an obligation to depose and state the facts. However, in this case, at no point of time any director appeared to explain the genuineness of the transaction.

12. M/s Jawahar Credits & Holdings Pvt. Ltd. has no creditworthiness to invest an amount of Rs,25,00,00,000/- in the appellant company. M/s Jawahar Credits has simply collected the money and invested in the appellant company. It was only a paper company and not doing any business. The creditworthiness of Jawahar Credits has not been established till date during any of the proceedings including the impugned one.”

3. The assessee is in appeal raising the following grounds:-

“1. Notice issued u/s 148 of the Act and order passed u/s 147 is bad in law.

2. Addition of Rs. 25,00,00,000/- received by the Appellant Company from M/s Jawahar Credit and Holding Pvt Ltd (Rs. 1,25,00,000/- as share capital and Rs. 23,75,00,000/- as share premium) by treating the said receipt as unexplained income as per provisions of section 68 of the Act.

3. Assessment order passed u/s 147 is non-est and bad in law.”

4. The additional ground was also raised by the assessee as follows:-

“That the order dated 05.01.2023 passed u/s 250 of the “Act” by the Ld. Commissioner of Income Tax (Appeals)-23, New Delhi is against law and facts on the file in as much as the reassessment order passed by the Ld. Assessing Officer is non-est and bad in law in as much as the Statutory Approval required u/s 153D of the Act was not taken before passing the assessment order which was mandatorily required to be taken by the Ld. Assessing Officer.”

5. Heard and perused the record. We first take into consideration the additional ground raised by the assessee. The ld. AR, relying upon the provisions of section 153D of the Act, submitted that as the words ‘assessment’ and ‘reassessment’ are mentioned in section 153D of the Act for grant of approval, therefore, when the AO intended to reopen an assessment concluded u/s 153A of the Act, then, the provisions of section 153D of the Act would again come into application and as in the case of assessee no such approval under section 153D of the Act has been taken, therefore, the assessment order is void ab initio.

5.1 However, the contention is not sustainable in law as we are of the considered view that assessment and reassessment mentioned u/s 153D of the Act refers to assessment and reassessment in consequence to the search. Here, in this case search assessment stood concluded, therefore, when there was a reopening on account of escapement of income the fact of earlier assessments being concluded u/s 143(3) or u/s 153A of the Act are of no consequence except where the reopening is being challenged on the basis that it is a case of mere change of opinion. Thus, the additional ground as raised has no substance. The same is decided against the assessee.

6. Then, coming to main grounds involving issue on merits and law it was submitted by the ld. AR that this ground no. 1 was raised before the CIT(A), but, was not adjudicated. In this regard, we find that in Form 35, the assessee had raised a specific ground as follows:-

“2. That the assessment order dated 24.12.2019 passed u/s 148 of the Act by Ld. Deputy Commissioner of Income Tax, Central Circle-3, New Delhi is against the law and facts on the file in as much as he was not justified to resort to the assessment proceedings u/s 148 and accordingly the notice issued under section 148 of the Act is bad in law.”

7. However, throughout the order of the ld. CIT(A), we fail to find any observation with regard to this ground. In regard to this ground the primary contention of the ld. AR was that the reopening is bad in law as there was no fresh information available with the AO. At page 87 of the paper book, the assessee has provided the copy of reasons for reopening and, after going through the same, we find that the reasons have been recorded for AY 2012-13. Then, certainly, the reopening is for a period beyond four years. The ld. AR has submitted that there is nothing in the reopening as to what was the incriminating material which was left out of consideration in assessment u/s 153A of the Act. It was also submitted that with regard to the disputed additions already in the case of finality was attained after the decision of the Tribunal in Jawahar Credit & Holdings (P). Ltd v. ITO [IT Appeal No. 5398 (Delhi) of 2017, dated 18-3-2021] for AY 2012-13, copy of which is made available as part of the paper book from pages 201 to 347. It was submitted that the assessee was show-caused in assessment u/s 143(3) of the Act by notice dated 26.02.2015, copy of which is placed at page 120 of the paper book, to explain the receipt of credit from M/s Jawahar Credit and Holdings Pvt. Ltd., and the assessee has responded to the same by way of a reply a copy of which is placed at pages 123 onwards of the paper book. Thus, the reopening is on stale information and there is no assertion in the reopening that anything was concealed or not disclosed by the assessee leading to escapement of income.

7.1 The ld. DR has defended the impugned orders and reopening by submitting that the subsequent information is the basis for reopening and, therefore, earlier assessment u/s 143(3) of the Act or u/s 153A of the Act are immaterial. It was also submitted that there was failure on the part of the AO to examine the genuineness of the transaction when concluding assessment u/s 143(3) of the Act. Therefore, the reopening is valid.

8. However, after taking into consideration the reopening reasons available at pages 87-91 of the paper book, we find that the AO himself mentions in the reopening as follows:-

“It is true that the assessee has filed a copy of annual report and audited P&L. A/c and balance sheet along with return of income but has not been disclosed various information/facts necessary for assessment as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c and balance sheet and other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence accordingly attracting provisions of Explanation I of section 147 of the Act.

It is evident from the above discussion that in this case, the issues under consideration were never examined by the A.O. during the course of regular assessment. This fact is corroborated from the contents of notices issued by the AO u/s 143(2)/142(1) and other sheet entries as mentioned in order also recorded during the 153A r.w.s 143(3) proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the courses of assessment proceeding and the same may be embedded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract this information, For aforestated reasons. it is not a case of change of opinion by the AO.

In this case more than four years have lapsed from the end of assessment year under consideration. In view of the facts discussed above. I have reason to believe that income to the extent of Rs.25,00,00,000/- chargeable to tax has escaped assessment for the A.Y. 2012-13 on account of failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for the year under consideration particularly in light of the Explanation 1 of section 147 of the I.T. Act, 1961. Hence, it is a fit case for issuance of notice under section 148 of the Income-tax Act, 1961.”

9. Now, as a matter of fact, at page 120 of the paper book, the copy of notice u/s 142(1) of the Act is available which shows that by notice dated 26.02.2015, the AO had called for explanation with regard to share application money to the tune of Rs.98,54,40,000/- including share premium of Rs.76 crores received from ten parties of which one was receipt of Rs.25 crores from M/s Jawahar Credit and Holdings Pvt. Ltd. All the relevant details about this were called and the assessee, by way of a reply dated 18.03.2015, a copy of which is placed at pages 123 onwards, has provided all necessary documents including confirmations. The assessment order u/s 143(3) of the Act was passed on 23.03.2015. Thus, after the assessee’s reply dated 18.03.2015, the assessment was concluded on 23.03.2015 u/s 143(3) of the Act.

9.1 Then, at page 136 of the paper book, the assessee has provided a copy of the questionnaire u/s 142(1) of the Act issued for completing the assessment u/s 153A of the Act wherein also the Assessing Officer had called for relevant information and documents in regard to the allegation that the assessee has invested a huge amount of money in the form of share capital in M/s Bhushan Steel Ltd. Information was also sought to give details of share application money received by the company during the year and at page 140 of the PB, the assessee has provided a copy of the reply dated 02.11.2016, wherein all the necessary information with regard to share capital in the form of confirmations, bank statements, ITRs of the investors, copy of ROC return, resolution, annual returns were provided and based upon the same, the assessment u/s 153A r.w.s 143(3) of the Act was concluded on 30.12.2016.

9.2 Thus, there is no force in the contention of the ld. DR that the AO had no opportunity to examine the genuineness of the investment in earlier assessments. Rather, we are of the considered view that the manner in which the information was sought and responded by the assessee and then the assessments were concluded in the timeline provided under the Act, the intention of the AO seems to be to conclude the assessments for the time being and to reopen at convenience and it is for this reason very conveniently the AO observes in the reopening, as reproduced above with our emphasis on relevant part in bold, that although information was available in the books of account, annual reports, audit report, P&L Account and balance sheet and other evidences, but, could not have been discovered with due diligence. Thus, there is no doubt in the mind of this Bench that reopening is on the basis of stale information and this is a case of reopening for convenience by change of opinion.

10. At the same time, we find that the whole allegation against the assessee is of receiving money from Bhushan Steel group. The ld. CIT(A) has considered the fact that the Bhushan Steel Ltd. through M/s Jawahar Credit and Holdings Pvt. Ltd., was investing in assessee. Now, admittedly, in the case of Jawahar Credit & Holdings (P). Ltd (supra) assessment was completed and the AO had made the addition on account of accommodation entries by way of share capital which was deleted by the another CIT(A) holding that M/s Jawahar Credit and Holdings Pvt. Ltd. was only a conduit company for routing all funds and not the beneficiary so only commission income was attributable. The ld.CIT(A) has considered this argument and observed in paras 9 to 12 as follows:-

9 The above findings of the Ld. CIT(A) is not contrary to the findings of the Assessing Officer in the present case. It is not a case wherein the same amount is added once again in the case of Jawahar Credit only. The present order of the Assessing Officer is the logical consequence to the order of the CIT(A) because he rightly held that the Jawahar Credit was not the beneficiary but only a conduit for routing the transaction. If that be so, then the addition needs to be made in the case of the appellant company because he has received Rs.25,00,00,000/- from the Jawahar Credit and is the beneficiary of such funds/money.

10. The appellant is a group company of Bhushan Steel Group and was found to be engaged in money laundering in a big way. The transaction of the appellant is basically part & parcel of organised financial crime wherein variousmodus operandi like bogus LTCG, bogus share capital etc. was employed to bring unaccounted money in the books of accounts. The money was routed through various entities to evade investigation. The transactions were camouflaged as that of share application like in the present case. The appellant company has no regular business activity and its major turnover is reportedly derives from miscellaneous receipts.

11 In the present case, there is no justification whatsoever for charging very high share premium (Rs.190/- per share) against the face value of Rs. 10/- per share. At no point of time in any of the proceedings, the appellant or any entity was able to establish the genuineness of the transaction. Further, Jawahar Credit could not explain the transaction when opportunity was provided to them. If the transactions are genuine, in that case the directors of the companies concerned has an obligation to depose and state the facts. However, in this case, at no point of time any director appeared to explain the genuineness of the transaction.

12. M/s Jawahar Credits & Holdings Pvt. Ltd. has no creditworthiness to invest an amount of Rs.25,00,00,000/- in the appellant company. M/s Jawahar Credits has simply collected the money and invested in the appellant company. It was only a paper company and not doing any business. The creditworthiness of Jawahar Credits has not been established till date during any of the proceedings including the impugned one.”

11. Now, as a matter of fact, all these assertions of the ld. CIT(A) stands subsumed in the findings of the Tribunal vide order dated 18.03.2021 in the case of Jawahar Credit & Holdings (P). Ltd (supra) wherein even the addition of 2% commission was deleted by holding as follows:-

“72. Even otherwise also, since all the assessees are essentially group companies and the common management under one control, the question of any hypothetical charge of any commission income for providing facility to route the funds of any group company does not arise. The entire addition is based on surmises and presumption, because, the ld. CIT (A)’s reasoning is based practice prevalent in the market sans any tangible material or inquiry or evidence on record. Thus, the addition made on basis of estimation of 2% of commission income in the case of these three assessees, i.e., Jawahar Credit and Holdings Pvt. Ltd., Jingle Bells Alluminium Pvt. Ltd. and Kasper Information Technology Pvt. Ltd. is directed to be deleted.”

12. On the basis of the aforesaid discussion, we are of the considered view that otherwise on merits too the case of the Revenue that the assessee was the beneficiary by way of accommodation entries is not sustainable.

13. In the light of the aforesaid, we are inclined to decide the main grounds no. 1 to 3 in favour of the assessee. The appeal filed by the assessee is allowed. Impugned orders are quashed.