2022 (10) TMI 336 - AT - Income Tax

Tribunal rules in favor of assessee, quashes reassessment under section 147.

Vishal Aggarwal Versus Income Tax Officer, Ward-23 (3), New Delhi

Vishal Aggarwal Versus Income Tax Officer, Ward-23 (3), New Delhi - TMI Issues:1. Validity of action initiated under section 147 by the Assessing Officer2. Classification of Long Term capital Gain on sale of shares as bogus transactions3. Addition of Rs 40,47,573 made by the Assessing Officer4. Rejection of claim of earning genuine Long Term capital Gain5. Reopening of the case based on information from Investigation Wing6. Correlation of facts and documents in reassessment proceedingsAnalysis:Issue 1: Validity of action initiated under section 147The appeal challenged the correctness of the action initiated under section 147 by the Assessing Officer. The CIT(A) upheld the legality of the action, leading to the appeal before the tribunal. The tribunal analyzed the grounds raised by the assessee and found discrepancies in the allegations made by the Assessing Officer regarding the purchase of shares, mode of payment, and nature of transactions. The tribunal concluded that the reasons recorded for reopening the case were faulty and not based on facts, rendering the notice of reopening unsustainable in law. Consequently, the tribunal quashed the reassessment proceedings and the order of assessment under Section 143(3)/148.Issue 2: Classification of Long Term capital Gain as bogus transactionsThe CIT(A) held that the Long Term capital Gain on the sale of shares was a bogus transaction and only an accommodation entry. However, the tribunal found that the Assessing Officer's allegations were unfounded, as the shares were purchased through recognized stock exchanges and sold after holding them for more than 15 months, complying with tax regulations. The tribunal noted the regularity of transactions and profit/loss patterns, indicating genuine trading activities. Therefore, the tribunal disagreed with the CIT(A)'s classification and held that the claim of earning genuine Long Term capital Gain was valid.Issue 3: Reopening of the case based on information from Investigation WingThe Assessing Officer initiated action under section 147 based on information received from the Investigation Wing regarding alleged irregularities in the transactions. The tribunal scrutinized the allegations and found discrepancies between the facts on record and the reasons recorded by the Assessing Officer. The tribunal emphasized the lack of independent application of mind by the Assessing Officer and the absence of correlation between the documents received and the allegations made. Due to these deficiencies, the tribunal deemed the notice of reopening as legally unsustainable and quashed the reassessment proceedings.In conclusion, the tribunal allowed the appeal of the assessee, highlighting the faulty reasoning behind the reassessment proceedings and the lack of factual basis for the allegations made by the Assessing Officer. The tribunal's decision emphasized the importance of proper assessment procedures and adherence to legal standards in initiating tax actions.