Penny stock trades showing 50x gains and exempt LTCG claim led to reopening u/s147; s.148A(d) upheld

Reopening under s.147 and the validity of the s.148A(d) order were challenged on the ground that the transactions reflected genuine capital gains. The HC held that the material recorded showed purchase of penny stock at face value and sale at about fifty times the price, with exempt LTCG claimed, and the AO's prima facie finding that the assessee was a beneficiary of routing unaccounted income through bogus LTCG/STCG; at the writ stage, the assessee's bifurcation of gains and computation could not be accepted, and the cited HC precedent on mere cash deposits was inapplicable. The s.148A(d) order was upheld and interference declined, with liberty to raise all contentions before the AO.

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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.

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