Pawan Garg Vs ITO (ITAT Chandigarh)
Reassessment u/s 148 Quashed for Lack of Tangible Material; Bogus LTCG Addition u/s 68 Deleted – ITAT Chandigarh
The ITAT Chandigarh allowed the assessee’s appeal for AY 2014-15 & quashed the reassessment proceedings u/s 147/148, holding that the AO lacked any tangible material with live nexus to form a belief that income had escaped assessment.
In this case, the assessment was reopened on the basis of generic information uploaded on the Insight Portal alleging that the assessee was a beneficiary of bogus LTCG of ₹61.23 lakh through reputed stocks. The Tribunal noted that the reasons recorded were vague & mechanical, as the AO did not even mention the name of scrips, dates of purchase/sale, broker details, mode of payment or how the assessee was connected with the alleged modus operandi. The reasons were recorded one day before the limitation date, approval was obtained & notice u/s 148 was issued on the last day, indicating a borrowed satisfaction.
The ITAT held that mere information from Investigation Wing or Insight Portal, without independent verification, cannot constitute “reason to believe”. There was no live nexus between the material & formation of belief, making the reopening invalid in law. Reliance was placed on binding precedents including Meenakshi Overseas & Supreme Court principles.
Once the reassessment itself was quashed, the addition of ₹65.24 lakh u/s 68 on account of alleged bogus LTCG automatically fell. Accordingly, the entire addition was deleted & the appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 04.12.2024 passed for assessment year 2014-15.
2. Though assessee has taken seven grounds of appeal, but his grievance revolves around two issues, namely;
a) ld.CIT (Appeals) has erred in confirming the reopening of assessment by issuance of a notice u/s 148 dated 30.06.2021.
b) Ld. CIT (Appeals) has erred in confirming the addition of Rs.65,24,960/- which was added by the AO by disbelieving the claim of Long Term Capital Gain. It has been added u/s 68 of the Income Tax Act.
3. The brief facts of the case are that assessee has filed his return of income on 27.09.2014 declaring total income of Rs.4,01,840/-. This return was accepted by the Department without making any changes. Thereaftr, according to the AO, he received an information that assessee is a beneficiary of bogus Long Term Capital Gain of Rs.61,23,120/-. He recorded the reasons for re-opening the assessment. Thereafter, he passed the re-assessment order which is a very sketchy one, therefore, we deem it appropriate to take note of the complete order, which reads as under :
“In this case, return of income was filed on 27.09.2014 declaring income of Rs.4,01,840/-. During the course of investigation proceedings on Tradenext Securities Ltd. (erstwhile Lifeline Securities Ltd.), it was found that the assessee is a beneficiary of bogus Long Term Capital Gain of Rs.61,23,120/- through reputed stocks by issuing ante dated forged contract notes during F.Y.2013-14 relevant to A.Y.2014-15. Thereafter, after recording the reasons, the case of the assessee was reopened u/s 147 with the prior approval of the competent authority and notice u/s 148 was issued on 30.06.2021. In compliance with the notice u/s 148, no ITR was filed by the assessee.
2. Vide notices u/s 142(1) Issued on 12.02.2022, 21.02.2022 and 28.02.2022, the assessee was required to furnish the following information/documents:-
“1. Nature and kind of your business and/or source of your income.
2. Please file ITR in compliance with the notice u/s 148 dated 30.06.2021.
3. Computation of Income for A.Y.-2014-15.
4. During the year under consideration, you have executed the transaction amounting to Rs. 61,23,120/- as a beneficiary of bogus LTCG through reputed stocks by issuing ante dated forged contract notes. Please furnish the detail of all the bank accounts alongwith narration of each credit and debit entries for the F.Y. 2013-14 relevant to A.Y. 2014-15. Please also justify LTCG with documentary evidence.”
3. In response to the above notices u/s 142(1), the assessee has not filed any written submission and nor was any adjournment sought for. During the year under consideration, the assessee is a beneficiary of bogus Long Term Capital Gain of Rs.61,23,120/- through reputed stocks by issuing ante dated forged contract notes during F.Y.2013-14 relevant to A.Y.2014-15. Vide above notices u/s 142(1), the assessee was required to justify the Long Term Capital Gain with documentary evidence but he has failed to furnish the reply. Therefore, Long Term Capital Gain of Rs.61,23,10/- as shown by the assessee is treated as undisclosed income of the assessee and added to his income.
Further, a show cause notice with draft assessment order has been issued on 20.03.2022 fixing the date for compliance on 23.03.2022. In response to the show cause notice, neither any written reply nor was any adjournment sought for.
4. After discussion, income of the assessee is computed as under:-
| Return income as shown in the ITR filed u/s 139 on 27.09.2014 | 4,01,840 |
| Add: Addition as discussed in para-3 above | 61,23,120 |
| Total income : | 65,24,960 |
After considering the facts of the case, assessment is completed on a total income of Rs.65,24,960/-. Charge interest u/s 234A, 234B, 234C and 234D as per the provisions of IT. Act, 1961. Penalty proceedings u/s 271F for non-filing of ITR in respect to the notice u/s 148 of the IT. Act 1961, penalty proceedings u/s 271 (1)(b) for noncompliance of notices u/s 142(1) and penalty proceedings u/s 271(1)(c) for concealing the income or for furnishing inaccurate particulars of income have been initiated separately. Issue notice of demand.”
4. The appeal to the CIT (Appeals) did not bring any relief to the assessee.
5. The ld. counsel for the assessee while impugning the orders of Revenue Authorities submitted that on 06.04.2009, assessee has purchased shares of IndusInd Bank for consideration of Rs.4, 17,950/-. All these payments have been made through Account Payee cheque and STT was also paid. The RTGS details are being placed in the Paper Book at page 4. These shares were sold on 03.06.2013 through broker Trade Swift Broking Pvt. Ltd. The sale consideration was Rs.62,03,611/- and the payment was received through RTGS. According to the Revenue, a search was conducted at the premises of Tradenext Securities Ltd. and Kundu Group of Rohtak on 25.01.2021. Therein, one Shri Sunil Batra disclosed that he and his family members have issued such Contract Notes. The AO, thereafter recorded the reasons. He drew our attention towards copy of the reasons available in the Paper Book, which read as under :
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6. The ld. counsel for the assessee submitted that these reasons were recorded on 29.06.2021 i.e. one day before the last day of the limitation. The file was sent for approval and approval was granted on 30.06.2021. Simultaneously, notice u/s 148 was issued on 30.06.2021. The ld. counsel for the assessee has emphasized that AO was not possessing any information except a letter exhibiting the alleged modus-operandi, but how it is connected with the assessee, nothing has been discussed in the reasons. Therefore, there was no tangible material available with the AO for forming a belief that income has escaped assessment. He submitted that reopening is bad in the eyes of law and therefore, not sustainable. In support of his contention, he relied upon a large number of decisions, which are as under :
i) PCIT Vs Meenakshi Overseas (P) Ltd. 82 taxmann.com 300(Del)
ii) G.D.Mother Educational Society V ACIT 170 taxmann.com 667 (Kolkata-Trib)
iii) Century Tradeserve Ltd. V Union of India taxmann.com 296 (Gujrat High Court)
iv) Rahul Rastogi V ACIT (ITA No.845/Del/2024) decision of ITAT Delhi Bench (dated 07.03.2025).
v) M/s Amico Textiles V DCIT (ITA No.430/CHD/2022) decision of ITAT Chandigarh (dated 15.07.2025
And lastly relied upon the judgement of Hon’ble Supreme Court in the case of Union of India Vs Rajiv Bansal 167 taxmann.com 70 (S.C.)
6.1. On the other hand, ld. DR relied upon the orders of the Revenue Authorities and submitted that AO got information from Investigation Wing about alleged earning of bogus Long Term Capital Gain and has rightly reopened the assessment.
7. We have duly considered the rival contentions and gone through the record carefully. A perusal of Section 147, as was applicable in assessment year 2013-14 would indicate that if AO has reasons to believe that any income chargeable to tax has escaped assessment, for any assessment year, he may, subject to the provisions of Section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment, which comes to his notice subsequently in the course of re-assessment proceedings. The AO must have a tangible information which has a live nexus with the formation of belief that income has escaped assessment. If we peruse the reasons, then it would reveal that there is no information possessed by the AO. He was not even aware which scrips were purchased. How much was the purchase price, whether these were purchased through account Payee Cheques/RTGS or otherwise. The AO was not even aware who was the Broker and how these Contract Notes were held to be bogus. Simpliciter, some information was uploaded on the Insight Portal by the Investigation Wing, which without cross-verifying with the record of the assessee, AO has treated it as gospel truth and formed the reasons. To our mind, there is no background material available with the AO for formation of belief that income has escaped assessment. In other words, there is no live nexus between tangible material possessed by the AO vis-a-vis formation of belief that income has escaped assessment. Accordingly, the re-opening of assessment is bad in the eyes of law as has been contemplated in various judgements relied upon by the ld. counsel for the assessee. We quash the reopening of assessment and accordingly, delete the additions.
8. In the result, appeal of the assessee is allowed.
Order pronounced on 02.02.2026.
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