2026 Supreme(Online)(ITAT) 11937

INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
Rajesh Kumar, AM
Bhawna Vinimay Private Limited – Appellant
Versus
Income Tax Department – Respondent
ITA No. [Not Specified]

Reopening of assessment based on a dissemination note containing vague and factually incorrect information lacking substantive material is invalid. On merits, sale of shares with proven identity, creditworthiness, and genuineness of purchasers cannot be added under Section 68.

Headnote:(A) Income Tax Act, 1961 - Sections 147, 148, 148A(b), 148A(d), 133(6), 139(1), 68 - Reopening of assessment - Validity of notice under Section 148 - Requirement of valid information and independent application of mind by Assessing Officer - A show cause notice under Section 148A(b) and order under Section 148A(d) based on a dissemination note containing vague, unequivocal, and scanty information, which is factually incorrect and based on suspicion, conjuncture, and surmises, is bad in law - The Assessing Officer must have substantive and credible material to form a belief that income has escaped assessment, not mere suspicion. (Paras 3, 5, 9, 10, 11)

(B) Income Tax Act, 1961 - Section 68 - Unexplained cash credit - Sale of unlisted equity shares - Where the assessee proves the identity of the purchasers, the creditworthiness of the purchasers, and the genuineness of the transaction by providing names, addresses, PANs, confirmations, ITR acknowledgements, audited accounts, and bank statements, and the sale consideration is received through banking channels and recorded in audited accounts, no addition under Section 68 is sustainable. (Paras 12, 13, 14)

Facts of the case:
The assessee filed a return of income for A.Y. 2016-17 declaring income of Rs. 6,050/-. A show cause notice under Section 148A(b) was issued on 30.03.2023 based on a dissemination note which alleged that the assessee was a beneficiary of sale of unlisted equity shares of Rs. 5,70,41,000/-, that the assessee was a shell company related to an entry operator, and that there were high-value transactions in a bank account. The Assessing Officer subsequently passed an order under Section 148A(d) and issued a notice under Section 148. The assessee objected, providing extensive documentation including details of investments sold, parties to whom shares were sold, and audited accounts. The Assessing Officer did not dispose of the objections and proceeded to frame an assessment, adding the entire sale proceeds of Rs. 5,70,41,000/- as unexplained cash credit under Section 68. The CIT(A) confirmed the reopening and the addition on merits. The assessee appealed.

Findings of Court:
The court found that the dissemination note contained factually incorrect statements, including allegations about shareholding pattern changes and bank transactions, and that the entire reopening was based on suspicion, conjuncture, and surmises without any substantive material. The Assessing Officer failed to consider the assessee's reply and did not independently apply his mind. Therefore, the notice under Section 148A(b), the order under Section 148A(d), the notice under Section 148, and the consequent assessment were quashed. On merits, the court held that the assessee had discharged its burden under Section 68 by proving the identity, creditworthiness, and genuineness of the sale transactions of unlisted shares, relying on the decision of the jurisdictional High Court.

Issues: The main issues were (1) the validity of the reopening of assessment under Sections 147 and 148 based on a dissemination note that lacked concrete information, and (2) the sustainability of the addition under Section 68 on account of sale of unlisted shares.

Ratio Decidendi: The court ruled that a reopening of assessment based on vague, scanty, and factually incorrect information derived from a dissemination note that is mere suspicion cannot be sustained. The Assessing Officer must have substantive and credible material and must independently apply his mind. Furthermore, when the assessee provides comprehensive documentary evidence proving the identity, creditworthiness, and genuineness of transactions in respect of sale of shares, no addition under Section 68 can be made.

Result: Appeal allowed.

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 24.12.2025 for the AY2016-17.

2. The issue raised in ground no 1 is against the order of ld. CIT(A) upholding the reopening of assessment as made by the AO u/s 147 read with section 148 of the Act.

3. The facts in brief are that the assessee filed the return of income u/s 139(1) of the Act on 28.09.2016, declaring total income at ₹6,050/-. The show notice u/s 148A(b) of the Act was issued on 30.03.2023, wherein it was stated that assessee is a beneficiary as appeared in dissemination note mentioning ₹5,70,41,000/- for the impugned assessment year, annexing with the notice a verification which also referred to the dissemination note. The various allegations were made in the dissemination note. Dissemination note also referred to notice issued u/s 133(6) of the Act and also referred to some entry operator, Mahendra Sethia. Thereafter, the balance sheets for five years were analyzed and it was alleged that the assessee had liquidated investments in A.Y. 2016-17 and A.Y. 2017-18 of ₹5.70 crores and ₹14.13 crores respectively. Dissemination note also states that there was change in share holding pattern and directorship during F.Y. 2015-16, which was not correct as there was no such change. It was also alleged in the said notes that the assessee is a beneficiary of sale of unlisted equity shares. The assessee replied the said show cause notice by furnishing various documents such as details of non-current investments sold during the year along with documents of the parties to whom the shares were sold, details of long-term loans and advances along with details of source of funds, bank statement for the year, audited balance sheet, profit and loss account along with Schedules and ITR acknowledgement etc. The assessee requested the ld. AO to drop proceedings as there was no evidence suggesting that income has escaped assessment.However, the ld. AO, without disposing off the objections raised by the assessee, passed the order u/s 148A(d) of the Act on 27.04.2023, wherein it was held that it is fit case to issue notice u/s 148 of the Act. Finally, the ld. AO issued notice u/s 148 of the Act, which was complied with by the assessee by filing the return of income on 23.12.2023, declaring income of ₹6,050/-. Thereafter the statutory notices along with questionnaire were issued which were replied by the assessee and the ld. AO, after taking into account the reply of the assessee, came to the conclusion that the sale of investments to the tune of ₹5,70,41,000/- was unexplained cash credit on the ground that assessee has failed to prove the creditworthiness and genuineness of the transactions and consequently the same was added to the income of the assessee in the assessment framed by the AO.

4. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by dismissing the appeal of the assessee by observing and holding as under:-

“6.2.1 It is evident from the assessment order that the ld. AO reopened the case on the basis of the information available with the department. The AO found that income chargeable to tax has escaped assessment and after following the due procedure as per the provisions of Sec 147 rws 148A of the Act with the approval of the specified authority has reopened the case and issued the notice u/s 148. In response to the said notice, the appellant also filed ROI for the year under consideration. The order u/s 148A(d) passed by the AO is placed below, wherein he has recorded that on examination made by him of the information available to him and the submission of the appellant he arrived at the conclusion that the case was fit for reopening and therefore reopened and issued the notice u/s 148 with prior approval of the specified authority. Therefore, the grounds 2 to 5 are dismissed. ”

5. The ld. AR vehemently submitted before us t

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