2022 (9) TMI 1190 - HC - Income Tax

Court upholds Income Tax Act order for AY 2015-16, rejects jurisdictional challenge. Petitioner lacks evidence.

SAROJ BHATIA Versus PRINCIPAL COMMISSIONER OF INCOME TAX & ANR.

The court upheld the order passed under Section 148A(d) of the Income Tax Act and the notice issued under Section 148 for Assessment Year 2015-16, ... Reopening of assessment u/s 147 - Validity of order passed u/s 148A(d) - penny stock purchases - HELD THAT:- This Court finds that in the impugned order passed u/s 148A(d) it is stated that the petitioner had sold penny stock i.e. M/s Solis Marketing Ltd. for a consideration - The impugned order further states that the petitioner did not furnish the Demat Account Statements or respond to the case on merits of case in his reply to the show cause notice. This Court takes judicial notice of the fact that in the case of another assessee who had similarly purchased the stock of M/s. Solis Marketing Ltd., the revenue department has alleged that the assessee therein had earned long term capital gain which was almost forty-five times the investment within a short span of time. In this case as well, a perusal of the petitioner’s reply dated 29th May, 2022 evidences that the shares purchased at face value of Rs.1 were sold at approx. Rs.50 per share earning the petitioner the LTCG which were admittedly claimed as exempt income. AO in the impugned order has also held that ‘the assessee is one of the beneficiary of generating bogus LTCG & STCG through M/s Solis Marketing Ltd. in planned manner and has routed her unaccounted income. The total consideration has escaped assessment’. In fact, in the impugned order, it has been repeatedly emphasised by the AO that the entire consideration received by the petitioner is income that has escaped assessment. Neither the bifurcation between the STCG and LTCG nor the calculation of income furnished by the petitioner can be accepted at this stage in writ proceedings. The judgment of the Rajasthan High Court in Abdul Majeed [2022 (7) TMI 865 - RAJASTHAN HIGH COURT] has no application to the facts of the present case as in the said case ‘only cash deposit chargeable to tax had escaped assessment, without anything more’ This Court is of the view that the impugned order calls for no interference at this stage. However, the petitioner is given liberty to raise all contentions and submissions before the AO. Issues:1. Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for Assessment Year 2015-16.Analysis:The petitioner challenged the order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act for the Assessment Year 2015-16. The petitioner argued that the order and notice were without jurisdiction as the alleged income that escaped assessment was less than the jurisdictional requirement of Rs.50 Lakhs. The petitioner contended that the Assessing Officer did not consider the detailed submissions, including the payment of tax on Short Term Capital Gain (STCG) and the claim of Long Term Capital Gain (LTCG) under Section 10(38) of the Act. The petitioner also highlighted that the Assessing Officer's finding of an income of Rs.50,10,500/- escaping assessment was factually incorrect, as the available material suggested an income of Rs.34,44,855/- had escaped assessment. The petitioner relied on the judgment of the Rajasthan High Court in a similar case to support the argument that the order was incorrect.Furthermore, the court noted that the impugned order mentioned the sale of penny stock without providing Demat Account Statements or responding to the show cause notice on the merits of the case. The court observed a similar case involving the purchase of stock from the same company, where the revenue department alleged bogus LTCG and STCG, indicating a planned manner of routing unaccounted income. The Assessing Officer concluded that the entire consideration of Rs.50,10,500/- had escaped assessment. The court emphasized that the bifurcation between STCG and LTCG or the calculation of income provided by the petitioner could not be accepted in the writ proceedings. The court distinguished the present case from the judgment of the Rajasthan High Court cited by the petitioner.In conclusion, the court found no interference necessary with the impugned order at that stage but granted the petitioner liberty to raise all contentions and submissions before the Assessing Officer. The court disposed of the writ petition and pending applications while allowing the petitioner to present their case before the Assessing Officer.