Revenue's appeal allowed: additions under s.68 and reassessment under s.263 upheld for unproved share-credit transactions

Calcutta HC allowed the revenue's appeal, holding the Tribunal erred in fully accepting the assessee's claim under s.68. The HC found the assessee failed to prove genuineness, creditworthiness and identity of counterparties and that the share-price rise was artificially manipulated; AO and CIT(A)'s inferential findings were reasonable. In view of an earlier HC pronouncement criticizing the relied-upon ITAT decision, the court upheld additions under s.68 and sustained the exercise of power under s.263 in favor of the revenue.

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Issues Involved:
1. Validity of the re-assessment order.
2. Verification and enquiry of fictitious booked loss.
3. Applicability of the Kolkata High Court decision in Pr. CIT-5 vs. Swati Bajaj.

Issue 1: Validity of the Re-assessment Order
The revenue questioned whether the Tribunal committed a substantial error in law by holding that the re-assessment order dated 20.03.2020 was bad in law. The Tribunal had allowed the assessee's appeal by fully relying on its earlier decision in SMT. USHA DEVI MODI vs. CIT. The High Court found that the Tribunal's reliance on the Usha Devi Modi case was misplaced as the revenue's appeal against that decision had been allowed by the High Court on 30.03.2023. Thus, the Tribunal's order was deemed incorrect and required interference.

Issue 2: Verification and Enquiry of Fictitious Booked Loss
The revenue contended that the Tribunal's decision was perverse because it held that the fictitious booked loss of Rs.73,22,950/- by the assessee company on account of sale transactions in penny stock shares needed no verification and enquiries. The High Court noted that the Tribunal had not conducted the necessary enquiry into the genuineness of the transactions and had ignored the manipulative practices involved. The Tribunal's superficial handling of the matter led to the conclusion that its order was not only perfunctory but also perverse.

Issue 3: Applicability of the Kolkata High Court Decision in Pr. CIT-5 vs. Swati Bajaj
The revenue raised the issue of whether the point of law had been decided by the Kolkata High Court in the matter of Pr. CIT-5 vs. Swati Bajaj. The High Court confirmed that the Tribunal had followed its decision in the case of M/s. Gitsh Tikmani (HUF) and Others, which was subsequently overturned by the High Court in the Swati Bajaj case. The High Court emphasized that the Tribunal failed to consider the surrounding circumstances and the manipulative practices that were central to the case, thus necessitating interference with the Tribunal's order.

Conclusion:
In light of the above issues, the High Court allowed the appeal filed by the revenue, answering the substantial questions of law in favor of the revenue. The Tribunal's order was set aside due to its reliance on an overruled decision and its failure to conduct a proper enquiry into the transactions.

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