2025 (2) TMI 1631 - AT - Income Tax

Reassessment validity: reopening under section 148/147 unsupported and additions under section 69C/115BBE held invalid.

Reopening of assessment under section 148/147 was invalidated for lack of concrete material establishing the requisite reasons to believe; the ... Validity of reopening of assessment - reasons to believe - additions u/s 68 r/w section 115BBE - sale consideration of equity shares treated as income from undisclosed sources - reopening proceedings on entirely new ground - whether the assessee was involved in the transaction of availing any bogus LTCG/STCL? HELD THAT: - We have gone through the notice issued u/s. 148A(b) wherein it was specifically enquired by the AO that the assessee was indulged in the fictitious LTCG/STCL through the scrip of M/s. Lactose (India) Ltd. whereas the assessee actually earned income under the head short term capital gains. Thereafter AO further asked through the notice issued u/s. 142(1) of the Act that the assessee was amongst the non-filer of return, which is factually incorrect and demonstrates the non-application of mind by the AO and his casual approach in the whole matter. AO chosen to add the whole amount of sales consideration (Alongwith presumptive expenses u/s. 69C of the Act). Moreover, from where the figure of Rs. 41,30,312/- was picked by the AO, that is also beyond our understanding. The whole re-opening found to be on wrong appreciation of facts, non-application of mind and with a casual approach by both the lower authorities. Also assessee requested for copies of information received from DDIT(Inv.), 5(1), Delhi, but the same were categorically denied to the assessee. We have considered the price movement in the shares of the company M/s. Lactose (India) Ltd. and from any angel it can’t be said to be a penny stock. There is no whisper of any manipulation by the assessee found in terms of any illegitimate gain availed by the assessee or is a part of any larger conspiracy against the Revenue. Rather, the whole case is made out on sheer conjectures, surmises and guess work. On peruse the notice issued under section 148 and the reasons for reopening the assessment it becomes clear that the same are founded on non-existent transaction of LTCG/STCL. Inspite of the assessee elaborating in its reply as well as the objections that it had never entered into any such transaction the Assessing Officer made no efforts whatsoever to rectify the blatant blunder and instead he has tried to justify the fundamentally flawed reopening proceedings on entirely a new ground that the assessee was in collusion with M/s. Mangal Savitri Bizcon Pvt. Ltd. to arrange STCL for M/s. Mangal Savitri Bizcon Pvt. Ltd. This observation of the Assessing Officer is also incorrect on the face of record because the total shares the assessee dealt with were 76,000, whereas the shares pertains to M/s. Mangal Savitri Bizcon Pvt. Ltd. were only 8,627. Resultantly the very foundation of the impugned notice, the reasons to believe and the order turning down objections is non-existent. All the three proceedings are sheer conjectures and surmises. We found that the notice issued, proceedings initiated and consequential order passed by the AO is without any authority of law, rather the same is found to be in violation of law and extra judicial measures were being adopted by the authorities below and same are not appreciable and sustainable at all.[Paras 4, 5, 6, 7] Final Conclusion: The appeal is allowed; the reassessment notice and the consequential additions are set aside because they were founded on non-application of mind and conjectural reasoning, and there was no tangible evidence of any bogus transaction or manipulation by the assessee. Issues: Whether the reassessment proceedings initiated by issuing notice under section 148 read with section 147 of the Income-tax Act, 1961 and consequential additions under section 69C read with section 115BBE are valid, or whether the reopening and additions are without jurisdiction and based on conjecture.Analysis: The factual matrix shows purchase and sale of shares through a broker resulting in declared short term capital gain already offered to tax. The notice under section 148A(b) alleged fictitious LTCG/STCL but the reassessment record lacks tangible evidence of manipulation, illegitimate gain, or participation in any larger conspiracy. The Assessing Officer relied on information purportedly received but denied the assessee access to that information and made inconsistent factual assertions (including incorrect non-filer status and unsupported figures). The Assessing Officer and the Commissioner (Appeals) did not demonstrate any concrete materials establishing the necessary reasons to believe for reopening; the additions were made on assumptions, conjectures and surmise without probing or rectifying evident errors in the reopening material.Conclusion: The reassessment notice issued under section 148 and consequential proceedings and additions under section 69C read with section 115BBE are invalid; the reopening and additions are set aside and the appeal is allowed in favour of the assessee.