Assessment declaring bogus long-term capital gains on listed shares bad in law under section 153C

Shri Rajender Agarwal Versus The A.C.I.T. Central Circle - 5 New Delhi

Shri Rajender Agarwal Versus The A.C.I.T. Central Circle - 5 New Delhi - TMI Issues Involved:
1. Legality of the assessment order under section 143(3) versus section 153A read with section 153C.
2. Addition of Rs. 78,85,851/- as non-genuine long-term capital gain.
3. Addition based on evidence not provided to the assessee and lack of opportunity for cross-examination.
4. Addition of Rs. 78,858/- as commission on presumptive basis.

Summary:

1. Legality of the Assessment Order:
The primary issue was whether the assessment should have been framed under section 153A read with section 153C of the Income Tax Act, 1961, instead of section 143(3). The Tribunal noted that the entire assessment was based on incriminating material found during search and seizure proceedings at the premises of stock brokers. Citing the Supreme Court's decision in Vikram Singh Bhatia, the Tribunal held that assessments based on search proceedings should be framed under section 153C, even if the search occurred before the amendment by the Finance Act, 2015. Consequently, the Tribunal quashed the assessment order as bad in law.

2. Addition of Rs. 78,85,851/- as Non-Genuine Long-Term Capital Gain:
The assessee contested the addition of Rs. 78,85,851/- as bogus long-term capital gain from the sale of shares. The Tribunal noted that the Assessing Officer's findings were based on a comprehensive investigation by the Income Tax Department's Investigation Wing, which unearthed a scam involving bogus long-term capital gains through penny stocks. However, since the assessment order was quashed on jurisdictional grounds, the Tribunal did not delve into the merits of this addition.

3. Addition Based on Evidence Not Provided to the Assessee:
The assessee argued that the addition was based on investigations and statements recorded behind their back without providing copies of the material or allowing cross-examination. The Tribunal acknowledged this grievance but did not address it substantively due to the quashing of the assessment order on jurisdictional grounds.

4. Addition of Rs. 78,858/- as Commission on Presumptive Basis:
The assessee also contested the addition of Rs. 78,858/- as commission on the long-term capital gain, arguing it was based on surmises and conjectures. The Tribunal did not find it necessary to address this issue separately due to the quashing of the assessment order.

Conclusion:
The Tribunal quashed the assessment order as bad in law for not being framed under the appropriate sections (153A read with 153C) and allowed the appeal of the assessee. The merits of the case were not examined further. The order was pronounced on 05.12.2023.