Income Tax Appellate Tribunal - Mumbai
K.A Investments Consultancy ... vs Ito, Ward 24(2)(1) Mumbai, Mumbai on 25 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL, 'E' BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.6592/Mum/2025 (Assessment Year :2013-14) K.A. Investments Consultancy Vs. ITO, Ward 24(2)(1), LLP Mumbai H/403, Vishal Apartment Sir M.V. Road Andheri (E) Mumbai- 400 069 PAN/GIR No.AADFL7917L (Appellant) .. (Respondent) Assessee by Dr. K. Shivram a/w. Shri Shashi Bekal Revenue by Shri Ritesh Misra, CIT DR Date of Hearing 05/02/2026 Date of Pronouncement 25/03/2026 आदेश / O R D E R PER AMIT SHUKLA (J.M):
The aforesaid appeal has been preferred by the assessee against the impugned order dated 02.09.2025 passed by the learned Commissioner of Income Tax (Appeals)-51, Mumbai, arising out of the assessment framed under section 143(3) read with section 147 of the Income Tax Act, 1961 for the assessment year 2013-14. In the various grounds of appeal, 2 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP the assessee has challenged, first and foremost, the validity of the reopening under section 147 on diverse legal grounds, inter alia, that the reassessment is based on mere change of opinion; that the ACIT had no jurisdiction to issue the notice; that there has been impermissible improvement in the reasons recorded; that no cross-examination was afforded; and that the entire exercise is founded on borrowed satisfaction. On merits also, the assessee has assailed the disallowance of business loss of Rs. 29,55,96,375/-, the disallowance of Rs. 37,83,507/- under section 14A, and the addition of alleged bogus commission of Rs. 88,67,891/-.
2. The facts, in brief, are that the assessee is a resident LLP engaged in the business of share trading, mutual funds and investment activities. For the assessment year 2013-14, the assessee filed its return of income on 25.09.2013 declaring Nil income. In the financial year 2012-13 relevant to the assessment year 2013-14, in the course of carrying on its business activities, the assessee had entered into purchase and sale of shares and securities, inter alia, including shares of Shree Nath Commercial and Finance Ltd. The assessee had incurred profits and losses in various scrips and during the year it had incurred losses on sale of shares of Shreenath Commercial and Finance Ltd. amounting to Rs. 22,89,96,974/-. The case of the assessee was selected for detailed scrutiny and notice under section 143(2) dated 3 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP 03.09.2014 was issued by ITO 24(2)(5), Mumbai. Thereafter, the original assessment came to be completed under section 143(3) vide order dated 30.03.2016 assessing the income at Rs. 11,23,080/- after set-off of brought forward loss of Rs. 4,05,679/-.
3. Subsequent to the completion of the said original assessment under section 143(3), notice under section 148 dated 27.03.2018 came to be issued by ACIT Circle 24(2), Mumbai. The reopening u/s.148 was initiated on the following reasons recorded:-
"The assessee filed the return of income for A.Y.2013-14 on 25.09.2013 declaring total income at Rs. Nil. In this case assessment was completed under section 143/3) of the Act on 30.03.2016 determining total income of Rs. 11,23,080/-
2 In this case a survey action under section 133A of the Income Tax Act, 1961 was conducted by the investigation wing of the department on 09.06.2015 Certain documents have been impounded at the time of survey action. During the course of survey action statement of Shri Amit Kesari, designated partner of the assessee firm was recorded. The answers to the relevant questions given by Mr Desai are reproduced hereunder for the sake of brevity:
Q.32 In the answer to the above question, it is observed that the major big investments have been made in the companies which are the strong in fundamentals. However, in the case of Shree Nath Commercial and Finance Limited, this company does not have worthwhile operations or any big fundamentals as such. Please comment, 4 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP Ans The decision for investments is not based solely on the basis of fundamentals. Various factors are considered while making investments in the market. For Eg. In the case of MTNL, the company has reported losses of more than 10,000 crores in the past 4 years yet the stock trades at a market cap of Rs. 1000 crores, Please provide the details of any other such losses in trading made 0.33 by Leena LLP Ans All the complete details regarding purchase, sale and stocks have been provided. And there would be such cases of losses in the same.
0.34 From the details given by you during the course of survey, it is observed that you have incurred loss approximately Rs 22 crores in the script of Shreenath Commercial during the period Jan 2013-March 2013. From the audit report of the LLP it is seen that the net income from operations is around 40 lakhs. That also means that there is income of more than 22 crores booked by you from share transactions which have got set off with the loss incurred by just one script. In the light of this observation, please explain as to why this loss of around 22 crores booked in the script of Shreenath Commercial should not be considered as non genuine in the light of the fact that it's a penny stock having no worthwhile fundamentals.
Ans: The entire trade in Shreenath Commercial was done in the share market based on above technical analysis. The sale and purchase was done in the open market on screen based trading of the stock exchange platform. We have taken actual delivery of the shares in our demat account and payment has been made in respect of the purchases through stock exchange mechanism (pay-in). In respect of sales also, actual delivery has been made to the stock exchanges through our demat account and the payment has been received through Stock Exchanges. The sale was made when the script was hitting lower circuit. If we wanted to show losses, there was no need to sell the script as the script was falling and even after the 5 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP sale, the script has fallen further. If we had not sold the script, the losses borne by us would have been more based on falling value. As on 31 March, 2013, the stock price fell further to Rs.20 and we would have incurred more losses. We have traded in more than 350 stocks and contracts in the cash and derivatives segment Profit and loss is incurred in various items and at times even in the same script, we would have profit in one trade and losses in another. We have made more than 3,30,000+ trades on the stock exchanges during the year. Even after losses, we would overall make profit and the same are duly disclosed in the Return of Income filed.
2.1 It is seen from the above that assessee has made a huge profit from the trading activity of shares of companies.
However, net profit at the end of the financial year is very meagre amount. The profit earned by the assessee It is further is adjusted against the loss he obtained/suffered in trading of the shares of one company viz. Shree Nath Commercial and Finance Ltd. noticed that the trading in the shares of the company Shree Nath Commercial and Finance Ltd. has been started by way of purchase of shares in the month of Janurary 2013 and entire shares were sold in the month of March 2013 In the entire activity of only one share, the assessee has suffered loss to the extent of around Rs.22 crores.
3. Further, it is seen from the trading pattern of the scrip Shree Nath Commercial and Finance a Ltd. that during the month of January 2013 to March 2013 the scrip was trading at its peak. The assessee buys the shares at peak (Rs. 80-85) and sold at a very low price (Rs.20-31) which resulted inte heavy loss. Further, it has also been noticed that investigation wing of Kolkata has carried out a massive search operation at several places in the country and unearth the modus operandi of bogus long term capital gains being used for getting the unaccounted cash converted into cheque through stock exchange route. The detailed modus operandi and finding recorded by the investigation wing is as under
4. Findings of the Investigation Wing 6 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP 4.1 Kolkata Investigation Directorate had undertaken detailed investigation into 84 penny stocks and has given detailed findings indicating bogus LTCG/STCL entries claimed by large number of beneficiaries. The modus operandi involving operators, intermediaries and the beneficiaries has been mentioned in detail in the investigation report prepared and disseminated by the Kolkata Directorate. Similar investigations were also conducted by the Directorate of Investigation at Mumbai and Ahmadabad 4.2 The basic aim of this dubious scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gain. This entry of LTCG is taken by selling the shares on the stock exchange and registering the proceeds arising out of the sale of shares into the books as LTCG. For implementing this scheme, shares of some Penny Stock Companies were used. The same modus is adopted for providing accommodation entry of bogus LOSS 4.3 In this scheme, the shares of the penny stock companies are acquired by the beneficiaries of LTCG at very low prices through the route of preferential allotment (private placement) and off market transaction in general. These shares have a lock-in period of 1 year as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Another route to acquire the shares is through Amalgamation or merger in this route, the beneficiaries of LTCG are allotted shares of a private limited company which is subsequently amalgamated with a listed penny stock and the beneficiaries receive shares of the listed penny stock in exchange of the shares of private limited company. The shares in some cases were acquired through stock exchange. These shares were then split and bonus shares were issued to increase the volume.
4.4 Thereafter, the prices of the shares of the penny stock companies are rigged and are raised through circular trading 7 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP This is managed by the "operator of the scrip. An Operator is a person who is managing the overall affairs of the scheme and he is the one who contacts the entities who wish to take entry of bogus LTCG/STCL in their books and arranges the same through the scrips of penny stock companies. The Operator manages many paper/bogus companies and uses them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on exchange, are always closely held and are controlled by the promoter of the Penny Stock Company and the Operator who is arranging for the bogus LTCG/Loss This is due to the fact that the general public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares.
4.5 Once the period of 1 year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at the inflated prices on the Stock Exchange. A point worth noticing here is that the purchase of the shares is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator which are referred to as "Exit Providers The unaccounted money of the beneficiaries is routed to these bogus entities Exit Providers and the shares held by the beneficiaries are bought by these bogus entities from the money which is the unaccounted money of the beneficiaries Sometimes, the shares of the LTCG beneficiaries are purchased by the beneficiaries of LOSS who later sell their shares when the price falls and hence book bogus LOSS in their books. All these transactions are done on the stock exchange and as the sale of shares are done after a holding of one year they fall into the category of Long Term Capital Gain which is an exempt income as per the IT Act, 1961 5 The scrip Shree Nath Commercial and Finance Ltd is one of the penny stock scrip reported by the investigation wing in which manipulative trading has been made using the stock exchange rout. Assessee is also one of the beneficiaries of trading in penny stock shares of M/s Shree Nath Commercial and Finance Ltd. The assessee has facilitated the person 8 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP having purchased the shares of Shree Nath Commercial and Finance Ltd in giving them the exit route by purchasing the shares and immediately selling it at a loss. The loss so incurred has been set off against the real income earned by the assessee. By this activity assessee able to manage in paying no or less taxes as almost entire income got set off against the artificial loss created on purchased and sell of shares at pre determined price. In the whole activity assessee acted as a facilitator for giving exit to the person having unaccounted money in the form of cash who has purchased the penny stock shares at a very nominal price and manage to sell it at a very high price at exchange and claimed exemption as long term capital gains. In the entire transaction assessee received cash through the operator and operators receives the cash from the person interested in getting entry on account of long term capital gains through stock exchange. Thus this transaction has double whammy on tax department, neither the persons receiving the entry in the name and form of long term capital gains pays any tax nor the assessee like the present assessee who obtains loss and set it off against the profit, pays any tax which was otherwise payable from the assesses on the profit earned by it at Rs. 22,05,85,534/-
6 In view of the above, I have reason to believe that income chargeable to tax of Rs.22,05,85,534/ has escaped assessment for A.Y.2013-14 within the meaning of sec. 147 of the Income Tax Act, 1961.
4. Thus, it is quite apparent that the entire foundation of the reopening was alleged loss in the scrip of Shree Nath Commercial and Finance Ltd., coupled with the report of the Kolkata Investigation Wing concerning 84 alleged penny stock scrips and the survey conducted by the Mumbai Investigation Wing upon the assessee on 09.06.2015. However, the core and foundational plea of the assessee before us is that all 9 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP these very materials, namely the investigation report, the survey action, the statement of the partner recorded under section 131, the details of purchase and sale of the said scrip, the brokers' ledger accounts, contract notes, demat statements, bank statements, volatility charts and allied material, were not only available with the Department at the time of the original assessment, but had in fact been specifically called for, examined and considered while framing the original assessment under section 143(3). Thus, according to the assessee, the reopening is nothing but an attempt to review the earlier conscious decision of the Assessing Officer on the same set of facts and material, which is legally impermissible.
5. Before adverting to the legal contours, it would be apposite to notice the sequence of material facts which emerge from the assessment order, which AO has quoted extensively. During financial year 2014-15 the Kolkata Investigation Wing Directorate independently carried out investigation in 84 scrips referred to as penny stocks and prepared a report dated 27.04.2015 alleging accommodation entries in the form of long-term capital gains, short-term capital loss and business loss to various beneficiaries. The report was available in public domain and based thereon, a list of alleged or suspicious beneficiaries was passed on to the Mumbai Investigation Directorate. The name of the present 10 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP assessee also figured therein, as according to the Investigation Wing the assessee had claimed loss of around Rs. 22 crores in one scrip, namely Shreenath Commercial and Finance Ltd. On the basis of this very report dated 27.04.2015, the Mumbai Investigation Directorate carried out survey on the assessee on 09.06.2015 and in the course thereof, statement under section 131 of the Act of Shri Amit Kesari, partner of the assessee firm, was recorded on 09.06.2015 and 10.06.2015 with specific questions in relation to the said scrip.
6. What is of considerable significance and in fact goes to the very root of the present controversy, is that the original assessment proceedings were very much pending when this survey was conducted and when the aforesaid statement was recorded. Thus, this was not some material discovered subsequent to the original assessment. On the contrary, it was material generated during the subsistence of the scrutiny proceedings and fully available to the Assessing Officer while framing the original assessment under section 143(3). The statement recorded on 09.06.2015 and 10.06.2015 was already on record and was also duly furnished before the Assessing Officer during the original assessment proceedings. The assessee had specifically placed on record the copy of the said statement vide letter dated 23.02.2016 as Annexure F, and the pages of the paper book clearly show that the same 11 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP formed part of the material before the Assessing Officer. In other words, the survey statement, which is now portrayed as one of the bases for reopening, was already a part of the original assessment record and was well within the knowledge of the Assessing Officer when he passed the order under section 143(3).
7. Not only this, on perusal of the original assessment record reveals that the Assessing Officer had issued multiple notices and raised pointed and specific queries during the course of original assessment proceedings with regard to share transactions and disallowance under section 14A. Notice under section 143(2) dated 13.04.2015 called for complete details of share transactions with brokers' notes. Notice under section 142(1) dated 02.11.2015 specifically called for details of purchase and sale of securities. It has been specifically pointed out by the ld. Counsel for the assessee that queries given during hearing on 04.12.2015 required break-up of profit and loss from each segment of shares and derivatives, STT certificate, global report, ledger and contract notes of brokers, and details of closing stock of shares and valuation thereof. Further notice under section 142(1) dated 21.01.2016 required exchange-wise and broker- wise details, global report, confirmation of ledger statement of all brokers and also particulars regarding section 14A. Thus, it was submitted that this factual matrix itself dispels any 12 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP notion that the issue was not examined in the original proceedings. The issue was not merely cursorily looked at; it was subjected to repeated and detailed scrutiny.
8. The ld. Counsel submitted and pointed out that assessee responded to the aforesaid notices and queries from time to time vide letters dated 04.09.2015, 26.11.2015, 15.12.2015, 23.02.2016 and 08.03.2016. Drawing our attention to each and every letter placed in the paper book, ld. Counsel submitted that vide letter dated 04.09.2015, the assessee furnished details of purchases and sales of equity and derivatives attached as Annexures D and E. Vide letter dated 26.11.2015, ledger accounts and global report of Samruddhi Stock Brokers Ltd. and Greshma Shares & Stock Ltd. in the equity segment were furnished. Vide letter dated 15.12.2015, details of purchase and sale of quoted equity and derivatives were furnished as Annexures B1 and B2. Most crucially, vide letter dated 23.02.2016, the assessee furnished copy of demat statements as Annexure A, scrip-wise details and charts indicating volatility and price movement as Annexures C and D, copies of bills, contracts, demat statements and details of sale and purchase as Annexure E, and copy of the statement recorded of partner Shri Amit A. Kesari in the course of survey action dated 09/10.06.2015 as Annexure F, wherein specific questions and answers relating to Shree Nath Commercial and Finance Ltd. had been recorded and which 13 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP thus stood squarely placed before the Assessing Officer in the original scrutiny proceedings. Again, vide letter dated 08.03.2016, explanation regarding low profit/losses and profit/losses in few scrips was furnished, and further explanation along with copy of bank statements as Annexures A and B was also filed. For the sake of clarity that all these issues were duly examined and enquired during the course of assessment proceedings as narrated above were summarized as under:-
Sr. Appellants Letter Particulars and Annexures where details of No. Dated transactions of Shree Nath Commercial and Finance Ltd were furnished 1 04.09.2015 Details of Purchases and Sales of Equity and Derivatives attached as Annexure D and E 2 26.11.2015 Ledger, Global Report of Samruddhi Stock Brokers Ltd and Greshma Shares & Stock Ltd- (Segment-Eq) 3 15.12.2015 Details of Purchase and Sales of quoted equity/derivative attached as Annexure B1 and B2 4 23.02.2016 Letter Copy of Demat statements as Annexure A Scripwise details and charts indicating volatility and price movements were enclosed as Annexure C and D Copies of Bills, Contracts, Demat Statements and Details of sale/purchase submitted as Annexure E. Statement recorded of partner Mr. Amit A. Kesari in the course of survey action u/s 133A dated 09/10.06.2015 by Investigation Wing, Mumbai as Annexure F in which specific questions and answers related to Shree Nath Commercial and Finance Ltd.
have been recorded which was in the knowledge of the Ld ITO during original assessment proceedings 5 08.03.2016 Explanation regarding low profit/losses and profit/losses 3 in few scrips 14 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP 6 08.03.2016 Explanation along with Copy of Bank Statements as 3 Annexure A and Annexure B
9. After considering the facts and material referred to before us, it is evident that the aforesaid proceedings demonstrates in an incontrovertible manner that the details of transaction in the very scrip which is now the subject matter of reassessment, namely Shree Nath Commercial and Finance Ltd., were furnished comprehensively and repeatedly before the Assessing Officer. The chart shows the dates of submission, the particulars and annexures where details of transactions in Shree Nath Commercial and Finance Ltd. were furnished and the corresponding pages of the paper book. It reveals that details of purchases and sales, derivatives, broker ledgers, global reports, demat statements, contract notes, volatility charts, copies of bills, statements recorded during survey, explanations regarding low profits and losses and even bank statements stood filed. Once such an inquiry through notices issued by the Assessing Officer and the eventual order passed under section 143(3) is properly scrutinized then, it becomes impossible to accept the Revenue's suggestion that the issue had escaped scrutiny at the original stage.
10. We find that the record further reveals that the transactions of M/s Shree Nath Commercial and Finance Ltd. were duly covered in the statement of Shri Amit Kesari, 15 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP partner of the assessee, recorded on 09.06.2015 and 10.06.2015 during the survey. It is evident that as per question nos. 27 and 29 of the said statement, details of purchases and sales of the shares of Shree Nath Commercial and Finance Ltd. were furnished, and as per question no. 28, ledger account reflecting payments and transactions made with brokers was already on record. Question and answer no. 30 of the said statement were to the following effect, namely that when the financials of Shree Nath Commercial and Finance Ltd. were shown and it was suggested that the company was not doing any significant business and the funds were very less and therefore it appeared to be a penny stock company, the answer given was that the investment was made on the basis of technical analysis; that the said stock was in B Group and also BSE Small Cap Index Stock; that subsequently it was also a BSE 500 Index Stock; and that since it was a B Group stock, it could not be considered as a penny stock. Further, as per question and answer nos. 32 to 34, the partner explained the rationale of making the purchase and sale in the said scrip, why the scrip alleged as penny stock was not considered as such at the time when the transaction was carried out, and why the loss incurred therein should not be considered as non-genuine.
11. In fact, the extracts of the assessee's submission before the Assessing Officer vide letter dated 23.02.2016 make the 16 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP position even more explicit. It was stated therein that, as discussed from time to time regarding losses incurred during the year in Shreenath Commercial and Finance Ltd. and other shares, all transactions had been carried out on BSE/NSE exchanges through recognised brokers; copies of bills, contracts and demat statements had been produced; details of the sale and purchase of the said scrip were submitted as Annexure E; the assessee had dealt in exchange platforms and there were no dealings other than verified trades; all transactions with exchanges and brokers were fully explained and reflected in the books; during the course of survey under section 133A in June 2015 by DDIT (Inv.), Mumbai, the above transactions had been specifically verified and no discrepancy had been found; in the submissions and statement during the course of the above survey and subsequently before the Investigation Wing, the assessee had explained the transactions and also submitted similar details called for; copy of statement recorded by DDIT (Inv.), Unit II, Mumbai under section 131 of the Act of the partner during the course of survey was enclosed as Annexure F; and it was specifically requested that the Assessing Officer note that during the course of survey itself all details were provided and explanations were recorded in the statement itself. This portion of the record, when read fairly, leaves no manner of doubt that not only the survey and its findings, but even the 17 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP assessee's explanation to the same, formed part of the original assessment record.
12. Yet another important facet is that during the course of original assessment proceedings, CBDT issued instruction dated 16.03.2016 for the guidance of Assessing Officers in completing or finalising assessments in respect of assessees who had transacted in alleged penny stocks. CBDT uploaded information on penny stock cases and made the same available to all Assessing Officers for pending scrutiny assessments, directing them to access the "Penny Stock"
functionality and ensure that information available thereunder, which may be useful for scrutiny cases, is examined and considered while finalising the assessments. Thus, even institutionally, all penny stock related material stood made available to the Assessing Officer before completion of the original assessment. This circumstance assumes importance because it completely negates the hypothesis that the original Assessing Officer was unaware of the investigation inputs or had no occasion to examine them.
13. From the above, it is quite palpable that the original assessment order under section 143(3) dated 30.03.2016 was thus passed after all these materials had come on record and after due enquiry. The order assessed the income at Rs. 11,23,080/- after set-off of brought forward loss of Rs.
18 ITA No. 6592/Mum/2025K.A. Investments Consultancy LLP 4,05,679/-. The record shows that the losses in the scrip of Shreenath Commercial and other shares were declared by the assessee in the return of income itself. The assessment under section 143(3) was completed by ITO 24(2)(5) after consideration of the submissions and after personal discussions during the course of hearings, written submissions and records produced, and accordingly after thorough verification, scrutiny and due application of mind. The survey statement of Shri Amit Kesari recorded on 09.06.2015 and 10.06.2015 during survey under section 133A by the Mumbai Investigation Wing formed part of the submission and record and was considered during the course of original assessment proceedings. The said statement dealt elaborately with the issue of loss of Rs. 22,89,96,974/- incurred by the assessee in the scrip of Shreenath Commercial and Finance Ltd. Details of purchase and sale, brokers' ledgers, bank statements reflecting payments to and from the share brokers by cheque, and demat statements were before the Assessing Officer during the original assessment. Queries regarding the smallness of profit issue were also raised several times and were duly responded to by the assessee with voluminous supporting details. On these facts, it can be gainsaid that the Assessing Officer had taken a conscious and considered view while framing the original assessment.
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14. Now, if one carefully and dispassionately analyses the aforesaid reasons recorded in juxtaposition with the material which was admittedly available and considered during the original assessment proceedings, the inescapable conclusion is that the very foundation of reopening stands demolished by the record itself. The reasons recorded expressly rely upon four essential strands; firstly, the survey action conducted on 09.06.2015; secondly, the statement of Shri Amit Kesari recorded on 09.06.2015 and 10.06.2015; thirdly, the Kolkata Investigation Wing report relating to 84 alleged penny stock scrips and lastly, the alleged loss in the scrip of Shree Nath Commercial and Finance Ltd. But each one of these strands was already embedded in the original assessment proceedings. The survey took place during the pendency of the scrutiny. The statement was recorded during that survey and later furnished to the Assessing Officer. The investigation report dated 27.04.2015 was already in existence and had formed the basis for the survey itself. The details of loss in the scrip were expressly reflected in the return of income, in the books of account, in the demat statements, in the broker ledgers, in the contract notes, in the bank statements, and in the specific replies filed before the Assessing Officer. Therefore, what is projected in the reasons as if it were some fresh tangible material is, in truth, nothing but the very same material which had been specifically scrutinised in the original proceedings.
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15. The assertion in the reasons or in the appellate order that the investigation report, statements of various parties and data available on the ITD system were made available in August 2016 also does not advance the Revenue's case in the peculiar facts here. Even assuming that certain collated data or dissemination letter was circulated in August 2016, the very report of Kolkata Investigation Wing dated 27.04.2015 was already available much earlier and in fact, had already triggered the survey on the assessee on 09.06.2015. The survey statement itself, containing specific questions on this very scrip, had already been recorded in June 2015 and furnished before the Assessing Officer during the original scrutiny. CBDT's letter dated 16.03.2016 had already made penny stock information available to Assessing Officers for pending scrutiny cases. Thus, the supposed freshness of the material is more apparent than real. In substance, nothing new emerged after the original assessment that was not already within the knowledge of the Department and before the Assessing Officer while he completed the assessment under section 143(3) on 30.03.2016.
16. Once the factual position is this clear, the legal consequence becomes equally clear. If in the original assessment completed under section 143(3) the Assessing Officer had raised specific queries on an issue, examined the 21 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP documents and records produced, applied his mind to the issue and formed a view, then recourse cannot thereafter be taken under section 148 merely for formulation of a different view on the same set of facts and records. That would be nothing but review in the guise of reassessment. The doctrine of "change of opinion" is not a mere technicality; it is an in- built constitutional restraint on arbitrary review of concluded assessments. It prevents reassessment from degenerating into a power of second thought on the same material.
17. In the present case, the chart showing the chronology of documents furnished during the original assessment, far from being an ancillary detail, is decisive evidence of the nature and depth of enquiry. The repeated notices, the multiple replies, the annexures containing demat statements, contract notes, brokers' ledgers, volatility charts, bank statements, and even the survey statement itself, collectively demonstrate that the Assessing Officer had before him the complete factual substratum of the transactions in Shree Nath Commercial and Finance Ltd. The argument of the Revenue that the reopening is based on subsequent tangible material is therefore rendered hollow by the assessment record itself. The very fact that the reasons recorded reproduce portions of the survey statement of Shri Amit Kesari and rely upon the same investigation report and the same transaction pattern only reinforces, rather than weakens, the assessee's case that the 22 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP reopening is based on the same material which was already considered earlier.
18. It is also important to note that the original Assessing Officer was not dealing with an undisclosed or concealed transaction discovered later. The assessee had openly declared the loss in the return of income. The scrutiny notices specifically targeted share transactions and section 14A. The assessee furnished scrip-wise details, purchase and sale details, demat and bank records and gave detailed explanations during the course of assessment. The survey statement was also filed before the Assessing Officer. The CBDT functionality on penny stock cases had already been made available. In these circumstances, the formation of belief under section 147 on the basis of the same investigation report, same survey, same statement and same transaction details is plainly a case of revisiting an issue already examined. That, in our considered opinion, is impermissible.
19. The legal position in this regard is no longer res integra. The Hon'ble Supreme Court in the case of CIT v. Kelvinator India Ltd. (2010)312/320 ITR 561 (SC) has held that though the Assessing Officer has the power to reassess, he has no power to review, and the concept of change of opinion must be treated as an in-built test to check abuse of power. The 23 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP Hon'ble Jurisdictional High Court in Bajaj Energy Ltd. v. ACIT (2024) 464 ITR 569 (Bom)(HC) has held that where information regarding investments and common expenditure was already provided during original assessment proceedings and the Assessing Officer had applied his mind thereto, reopening on the same issue is unjustified. Similarly, in D.K. Realty India (P.) Ltd. v. ACIT (2023)148 taxmann.com 468 (Bom)(HC), it was held that where the issue had been specifically gone into in the scrutiny assessment and queries were raised and replied, reopening on the same subject matter would be a change of opinion and would not satisfy the jurisdictional condition for reopening under section 147. Even more tellingly, on similar facts involving the same scrip, namely Shreenath, the Hon'ble Bombay High Court in Jainam Investments v. ACIT (2021) 131 taxmann.com 327 (Bom)(HC) held that where reopening was based on a general and bald statement of the Investigation Wing without disclosing any tangible material, the reopening was unjustified. These authorities apply with full vigour to the facts before us.
20. On an overall conspectus of the entire record, therefore, we are left with no manner of doubt that the reopening in the present case is bad in law. It is not merely a case where the material is insufficient; it is a case where the very material relied upon for reopening had already been specifically examined in the original assessment proceedings. The survey 24 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP conducted on 09.06.2015, the statement of Shri Amit Kesari recorded on 09.06.2015 and 10.06.2015, the Kolkata Investigation Wing report dated 27.04.2015, the details of purchase and sale of Shree Nath Commercial and Finance Ltd., the brokers' ledgers, contract notes, demat statements, bank statements, explanations regarding low profits and losses, and the CBDT penny stock information were all part of the original assessment record. The original assessment was completed only thereafter and after detailed enquiry. Consequently, the subsequent issuance of notice under section 148 on the basis of the very same material is clearly a case of change of opinion and, therefore, the assumption of jurisdiction under section 147 is vitiated.
21. Once we hold that the reopening is invalid and the notice under section 148 is bad in law, the entire reassessment order collapses. The additions made therein on account of disallowance of business loss, disallowance under section 14A, and alleged bogus commission do not survive for adjudication. They are rendered academic and need not be gone into on merits.
22. In view of the aforesaid discussion, we hold that the reassessment proceedings initiated under section 147 and the notice issued under section 148 for the assessment year 2013-14 are bad in law and are hereby quashed. The 25 ITA No. 6592/Mum/2025 K.A. Investments Consultancy LLP assessment framed under section 143(3) read with section 147 is accordingly annulled.
23. In the result, the appeal of the assessee stands allowed.
Order pronounced on 25th March, 2026.
Sd/- Sd/-
(GIRISH AGRAWAL) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 25/03/2026
KARUNA, sr.ps
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
//True Copy// BY ORDER,
(Asstt. Registrar)
ITAT, Mumbai