TaxTMI 
TaxTMI 
2019 (4) TMI 1114
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....der law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 4. That the notice, initiation and all subsequent proceedings u/s 148 is bad in law, is without jurisdiction, barred by law and requires to be cancelled. 5. The notice u/s 148 and service thereof is bad in law and the reassessment requires to be cancelled. 6. The conditions precedent to justify the reopening of the assessment u/s 147 of the Act being absent, the reopening of the assessment is bad in law and the reassessment requires to be cancelled. 7. That the authorities below erred in framing order under section 144 of the Act without following the prescribed procedure under law. 8. That the order u/s 144 r.w.s.147 of the Act is bad in law, as the appellant had disclosed the material facts fully and truly necessary for assessment and there is no new or fresh information or evidence warranting reopening of the assessment. 9. That the entire reassessment proceedings violates the procedure prescribed by the Supreme Court in 259 ITR 19 for 148 proceedings. 10.The reassessment proceedings is on a change of opinion on the same set of facts without there being an....
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....nterest u/s 234D is against the express provisions of law. 25. No opportunity has been given before levy of interest u/s 234B and 234D of the Act. 26. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234Band 234D of the Act. 27. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 3. The grounds raised by the assessee for Assessment Year 2013-14 in ITA No. 2374/Bang/2018 are as under. "1. That the order of the authorities below in so far as it is against the assessee is against the law, facts, circumstances, natural justice, equity all other known principles of law. 2. That the total income and total tax computed is hereby disputed. 3. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 4. That the notice, initiation and all subsequent proce....
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....icial treatment provided under the Act of the Capital gains earned by the assessee from the transfer of shares in M/s. Blue Circle Services Ltd of Rs. 7,86,38,101/-. 19. That the authorities below erred in making addition of Rs. 23,59,143/- u/s 69C of the Act. 20. That the authorities below erred in charging 3% of capital gains as the commission paid u/s 69C of the Act. 21. The appellant denies the liabilities for interest u/s 234B of the Act. Further prays that the interest if any should be levied only on returned income. 22. The appellant denies the liability for interest u/s 234D of the Act. The levy of interest u/s 234D is against the express provisions of law. 23. No opportunity has been given before levy of interest u/s 234B and 234D of the Act. 24. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234Band 234D of the Act. 25. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 4. The grounds rai....
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....without providing opportunity of cross examination in spite of request by the assessee. 15. That the authorities below erred in not providing complete details before calling for objections from the assessee. 16. That the authorities below erred in relying on irrelevant material while ignoring the relevant material and further erred in making addition solely on third party statement without any corroboration. 17.That the authorities below erred in making addition of Rs. 2,85,58,035/-u/s 68 of the Act. 18.That the authorities below erred in treating the capital gains declared by the assessee from transfer of shares of M/s. Blue Circle Services Ltd of Rs. 47,82,937/- u/s 68 of the IT Act. 19.That the authorities below erred in treating the capital gains declared by the assessee from transfer of shares of M/s.Parag Shilpa Investment Ltd (PS IT Infrastructure & Services Ltd) of Rs. 2,37,75,098/- u/s 68 of the IT Act. 20. That the authorities below erred in resorting to section 68 of the Act. 21. That the authorities below erred in refusing to grant the beneficial treatment provided under the Act of the Capital gains earned by the assessee from the transfer of shares....
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....sment requires to be cancelled. 7. That the authorities below erred in framing order under section 144 of the Act without following the prescribed procedure under law. 8. That the order u/s 144 r.w.s.147 of the Act is bad in law, as the appellant had disclosed the material facts fully and truly necessary for assessment and there is no new or fresh information or evidence warranting reopening of the assessment. 9. That the entire reassessment proceedings violates the procedure prescribed by the Supreme Court in 259 ITR 19 for 148 proceedings. 10.The reassessment proceedings is bad in law as the regular assessment proceedings was open. 11.The parallel reassessment proceeding is clearly barred. Any proceeding which is in conflict with regular proceeding is against law. 12.The reassessment proceedings is on a change of opinion on the same set of facts without there being any new evidence or information which is not permitted under law. 13.The reasons I findings of the authorities below are unsustainable and untenable in law as the same is contrary to the facts emerging from the record. 14. That the authorities below erred in relying on sworn statements provided ....
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....nos. 1 to 3 are general and ground nos. 4 to 6 and 9 to 10 are against validity of reopening of assessment and ground nos. 7 and 8 are on this aspect that the assessment order passed by the AO u/s. 144 is bad in law because the preconditions of section 144 are not complied with. Thereafter, he submitted that the remaining grounds are in respect of merit of the addition and charging of interest. 7. First he made arguments in respect of ground nos. 7 and 8 as per which this is the claim of the assessee that the assessment orders are bad in law because the pre-requirements of section 144 are not complied with. He submitted that as per the provisions of section 144 of IT Act, the AO can pass best judgment assessment order under following three conditions. i) If the assessee fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or ii) The assessee fails to comply with all the terms of a notice issued under subsection (1) of section 142 or fails to comply with a direction issued under subsection (2A) of that section, or iii) having made a return, fails to c....
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....ent of Shri Jagadish Prasad Purohit , the name of the Penny Stock Companies i.e., Blue Circle Services Ltd (BCSL) and PS IT Infrastructure & Services Ltd (formerly known as Parag Shilpa Investments Ltd) (PSIL) do not appear. On this, it is submitted that, the Learned AR has tactfully omitted to refer the complete modus operandi of Shri Jagadish Prasad Purohit, one of the operators of operating stock companies. It is pointed out that it not only operate in its own capacity or through the company in which he is a Director, but also through its cronies and trusted persons. One of its trusted person is Shri Dhruva Narayan Jha. In the statement recorded by DDIT(Inv) Unit-3(3), Kolkata on 21-01-2015, Shri Jha while answering to question no.7, has admitted that he is a salaried employee of the group companies maintained and managed by Shri Jagdish Prasad Purohit. As per his direction and instruction, he became Director in many companies. He has enumerated the name of the company where he is made Director. In reply to question no.8 wherein the very first company name is Blue Circle Services Ltd. In reply to question no.9, he has mentioned that in another 259 companies his name is ....
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.... 4. Cross Examination: On the issue of cross examination, the learned AR was pointing out that the opportunity for cross examination was not granted by the Assessing Officer. The statements recorded of the penny stock operators and their cronies in providing accommodation entries for commission are more in the nature of explaining the modus operandi and how the course of events are predetermined and so arranged as to translate into profits for all the parties involved. The statements are not specifically and solely against the appellant, who incidentally a beneficiary of the entire scheme. Therefore, there is no injustice imparted to the appellant on not being provided with an opportunity of cross examination. On the contrary, it appears that the entire scheme was so designed and executed that the mischievous elements were operating from behind the screen. The systematic execution of the predetermined acts did not require any personal, one to one interaction between the beneficiaries and the brokers. In any case, the appellant had already expressed his ignorance about the developments / activities that tool place behind the screen and he could also not furnish ....
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....ver concept of 'avoidance' as against 'evasion' may have to be exposed." Hon'ble Supreme Court in the case of Mcdowell& Co. Ltd (1985) 154 ITR 148(SC), wherein the Hon'ble Supreme Court has denounced tax avoidance, if not Bonafide. The relevant part of the observation of the Hon'ble Supreme Court is reproduced hereunder: "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges." Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or make believe. 5. We Will also like to bring to the notice of the Hon'ble ITAT on the judgements of the Hon'ble High Courts and Hon'ble ITATs which department would like to rely upon. These are listed out in the enclosed Annexure." b) Relevant Portion of the assessment order i.e. Para 9 &10:- "9. In th....
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.... income on 18.09.2012 declaring total income of Rs. 66,95,890/- consisting of Income from House property of Rs.l,48,246/-, Income from Profession of Rs. 12,88,972/-, Income from Capital gains of Rs. 3,14,480/- and Income from Other sources of Rs. 50,27,201/-. The assessee also earned exempt Long term capital gains of Rs. 16,27,57,903/-. During the regular assessment proceedings the bank statements, property wise rental details, details of income from other sources, confirmation of accounts from parties relating to unsecured loans, statement of computation of capital gains along with contract notes, details of income from profession and bank account details were obtained and verified. After thorough verification of the same, the assessment was completed u/s 143(3) of the Act on 24.03.2015 by accepting the return of income filed by the assessee (copy of assessment order passed u/s 143(3) is enclosed as Annexure 1). Subsequently, a notice u/s 148 of the Act dated 03.11.2016 was issued to the assessee on 11.11.2016. The assessee complied with the said notice on 09.12.2016 and also sought copy of the reasons recorded for reopening of the concluded assessment by issue of notice u/s 14....
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.... part of the AO to frame the assessment u/s 144 of the Act when there is compliance by the assessee in the proceedings. The AO has also not adduced proper reasons in the order for having completed the assessment u/s 144 Act. The strange reason adduced by the AO that the books of accounts are not reliable and true cannot be the basis for completing assessment u/s 144 of the Act. The provisions of the section does not approve the action of the AO. Thus the assessment u/s 144 is based on wrong facts and particulars. The AO has also not issued any show cause notice to the assessee seeking to complete the assessment u/s 144 of the Act thereby not following the due procedure prescribed under law. The AO is in error for invoking section 144 of the Act in as much the ingredients for invoking section 144 is clearly absent in this case. The best judgment assessment so made is clearly against law, bad in law and requires to be vacated. In this regard the assessee relies on the decision in the case of Mohini Debi Malpani vs ITO &Anr - Calcutta HC - 77 ITR 674 (Annexure 3) wherein the Court has held as under: "Assessment-Best judgment assessment under certain particular circumstances-Noncomp....
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....Assessee had paid royalty at 15percent- AO had held that since assessee company was earning royalties in India linked to the PE, the royalty income must be taxed at 20 percent gross instead of 15percent- Notice u/s 148 was issued and proceedings were initiated pursuant thereto-Assesses objection was also rejected-Assessee had claimed that reopening of assessment was done beyond 4 years from the end of the assessment year and therefore the first proviso of section 147 would come into play according to which there must be failure on the part of the assessee to fully and truly disclose all the material facts necessary for the assessment-Assessee claimed that the reasons recorded for reopening the assessment do not even allege that there has been any failure on the part of the assessee to fully and truly disclose all the material facts necessary for the assessment-Held, It was held by various High courts that in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the AO u/s 147 beyond the four year ....
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....2.2015, Shri Dhruv Narayan Jha-14 pages - 21.01.2015, Shri Dhruv Narayan Jha - 13 pages -21.01.2015, Shri. Jagdish Prasad Purohit - 19 pages - 21.01.2015, Shri. Jagdish Prasad Purohit - 9 pages - 19.10.2011, Shri. Jagdish Prasad Purohit - 11 pages - 12.02.2013, Shri. Jagdish Prasad Purohit - 9 pages - 17.12.2013 and the financial statements of three companies. The said material is not authenticated as required in law and consequently the veracity of the material is an open ended question. The assessee replied to the notice vide reply dt.06.03.2017 offering objections to the proposal in the notice and requested the AO to provide complete details and thereafter provide opportunity for cross examination, in the event the objections of the assessee are not considered favorably. Without appropriately considering the objections and the clarifications the AO completed the assessment u/s 144 rws 147 of the Act making additions as proposed in the show cause notice by referring to the purported oath statements stated to be recorded from Shri Amit Saraogi, Shri Soumen Sen, Shri Dhruv Narayan Jha, Shri. Jagdish Prasad Purohit consisting of 1 to 91 pages and financial statements of two compa....
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..../profits from the transactions are declared in the return of income filed. All the share transactions including the impugned transactions by the assessee are through recognized stock exchanges and banking channels and both receipts and payments are done through account payee cheques/RTGS. The underlying shares of the company are registered with the stock exchanges and also under the Companies Act. The Bank accounts are in reputed Banks, all indicating the genuinity and verifiability of the transactions. In support of the transactions made, the AO is in full possession of the details and was also perused during the survey. In view of absence of any irregularity, the transactions must be reckoned as genuine and resultant treatment in law also as genuine. The production of documents in the form of contract notes, demat statement, bank statements etc establishes the source, identity, creditworthiness and genuineness of the transactions. The AO has relied on the truncated oath statement of the assessee extracted in the assessment order which does not bring out anything incriminating or adverse inference against the assessee. Thus the AO erred in relying on irrelevant material while igno....
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....d details. It was also submitted that the AO has also at various places has made reference to the replies filed by the assessee and reproduced them and therefore, it was the claim of the assessee that it is erroneous on the part of the AO to frame the assessment u/s. 144 of the Act when there is compliance by the assessee in the proceedings. We find thatld. CIT(A) has noted and reproduced the submissions before him and as per ground no. 7 of appeal raised before CIT(A), this was the contention of the assessee that the AO erred in framing order u/s. 144 without following the prescribed procedure under law. Ground nos. 1 to 6 and 8 to 14 raised before CIT (A) were in respect of validity of reopening of the assessment and all these grounds were disposed of together by the ld. CIT(A) as per Para 5.4 of his order without giving any specific finding in respect of these objections of the assessee regarding absence of preconditions prescribed under section 144 of IT Act. 12. As per Para nos. 9 and 10 of the assessment order as reproduced above, it is seen that AO has referred to the judgment of Hon'ble Calcutta High Court rendered in the case of ITO Vs. Luxmi Prasad Goenka as reported i....
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....which he relies. It was also concluded that in such cases, section 23(4) ofIndian Income-tax Act, 1922 did not authorize for best judgment. Para 5 of this judgment is relevant and therefore, the same is reproduced herein below for ready reference:- "5. In the aforesaid three circumstances the ITO is enjoined to make best judgment assessment. In the instant case, the question is whether any of these three different situations contemplated by sub-s. (4) of s. 23 has happened in order to justify assessment under sub-s. (4) by the ITO. Counsel for the Revenue contended that in this case there was a failure to comply with the notice under sub-s. (2) of s. 23. It was urged that notice under sub-s. (2) of s. 23 has been given. That fact is undisputed. It also is apparent that the assessee did not, it was urged, produce any document or evidence or books of account of the firm to prove the genuineness of the claim made by the assessee in its return. Therefore, it was urged that the assessee had failed to comply with the terms of the notice under sub-s. (2) of s. 23 of the Act. We have noted sub-s. (2) of s. 23. It empowers the ITO, in cases where he is not satisfied with the return witho....
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....see under Section 139 of the Act, but the Income-tax Officer is not satisfied that the return is correct and complete without requiring the presence of the assessee or the production of books of account or other evidence on which the assessee may rely in support of his return. It is to be noted that such a notice under Section 143(2) of the Act may be confined only to the personal attendance of the assessee or to the production of books of account or other evidence or may require both. 9. From the admitted facts of the present case, a notice under Section 143(2) of the Act was issued to the assessee and the notice was complied with by the production of certain books of account by one C. M. Chopra on behalf of the assessee. Admittedly, the file in the present case was transferred from the Income-tax Officer, "J"-Ward, Dist I(I), Calcutta, to the Income-tax Officer, "D"-Ward, Dist I(I), Calcutta. Before the new officer could issue another notice under Section 143(2) of the Act in the present case, he, in my view, had to be satisfied that in spite of compliance with an earlier notice under Section 143(2) of the Act, he could not complete the assessment on the basis of the books of ....
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....by the AO that return of income was filed by the assessee on 18.09.2012 and in reply to notice issued by the AO u/s. 148 on 03.11.2016, the assessee has submitted letter dated 09.12.2016 stating that the return filed on 18.09.2012 may be considered as return in response to notice issued u/s. 148 of IT Act. Similarly for Assessment Year 2013-14 also, the AO has noted in the assessment order that the return of income was filed by the assessee on 19.09.2013 and in reply to the notice issued by the AO u/s. 148 on 03.11.2016, letter has been filed by the assessee dated 09.12.2016 stating that return filed on 19.09.2013 may be considered as return in response to the notice u/s. 148 of IT Act. For Assessment Years 2014-15 and 2015-16 also, the facts are similar. Hence this is admitted position of fact that there is no failure on the part of the assessee to file return of income u/s. 139 of IT Act. 15. Now we examine the second precondition. As per the second precondition u/s. 144 as reproduced above, it should be the case of the AO that the assessee failed to comply with all the terms of a notice issued under subsection (1) of section 142 of IT Act or assessee has failed to comply with....
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...., DP statements to strengthen your claim of Long Term Capital Gain. 3. I have gone through the submissions made by you. It is seen that however the events are not simple or lucid as stated to have been happened. There are some important circumstantial as well as direct evidences to show that the Long Term Capital Gain shown by you is not natural but is arranged one. General Preface 4. Before I deal with the specific details of this particular case, to put up the facts in perspective, it is necessary to give a background of investigation carried out by the investigation wing of the department. 4.1. The Directorate of Investigation, Kolkata carried out a country wide investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gains (LTCG) which is exempt from tax. The modus operandi adopted by the operators was to make the beneficiary buy some shares of a pre-determined Penny stock company controlled by them. These shares are transferred to the beneficiary at a very nominal price mostly off-line through preferential allotment or off-line sale. The beneficiary (an individual) holds the shares for one year, the statuary period after which ....
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....rial of transactions was also examined and, in a large number of transactions trial right from cash deposit account to the beneficiaries account was unearthed. As a result of investigation individuals who have been taken such entry of bogus LTCG amounting to several crores have been identified. The result of the investigation in brief is as under: i) Individuals throughout the country identified who have taken such bogus entries of LTCG amounting to several crores from 2010 to 2014. ii) The result of the enquiry was also shared with SEBI and the SEBI after investigating 11 cases have found the allegation to be correct. The balance cases are still being investigated by SEBI. iii) The TOP 25 groups under each investigation directorate of the country were confronted in course of further investigation. Almost all of them barring a few have accepted having taken the entries for a commission. A sum of crores has been voluntarily surrendered by such assessees. iv) In Kolkata, where this investigation was started some of the beneficiaries who had taken entries of nearly Rs. 40 crores have voluntarily surrendered it for taxation without any further enquiry. v) Several assesse....
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.... Jack up of share price of all these three companies : Next step was to jack up the price of all these three scrips. It is requested to go through the statement of Shri Asit Kumar Sen, Kolkata recorded on 10/02/2015. In his statement, Sri Soumen Sen had explained that, how Shri Jagdish Purohit & Shri Anil Purohit used to jack up prices of certain scrips including scrips mentioned above, with circuitous transaction made through operated Jama Kharchi companies. While answering Q. 19 & 20, Shri Sen had explained the mod us operandi of this jacking process. 5. Increase of share price of BCSL, PSIL non commensuration with financial results: The financial results of three companies are attached with for your information. It may be mentioned that price of share of all three scripts was sky rocketed without having any awesome profit, EBIDTA margin, EPS, bonus, dividend etc. It is seen that, all the parameters which are essential for increase of price of share not present or favorable. In spite of this, if share price is increased multi folded then it is definitely due to artificial increase by circular trading of shares forming cartel. This has been evidenced from the trading d....
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....d by DDIT, Kolkata on 21/01/2015 & 19/10/2011 by DDIT(INV)-Mumbai. A copy of this statements is enclosed. In his statement he has elaborately explained the modus operandi & admitted that all three companies are penny stock companies & he along with other per sons has provided bogus LTCG to various beneficiaries. In answer to various questions he has clearly admitted his business of entry providing, issue of dummy directors, control over layering companies, modus operandi of getting LTCG, specific modus operandi etc. His statement is direct evidence that your claim of LTCG is not genuine but arranged one. 5.9. Details of trade data & exit providers: These are the cross parties who have purchased shares from you and provided exit entry. In case of BCSL the change in share holding pattern every March, is provided to you. Here there are number of exit providers but only trade data above Rs. 25 lakhs is provided to you. It can be seen that all these are Kolkata based paper companies. It may be noted that one of the promoter i.e. Prime Capital Limited of BCSL is nothing but company operated by Shri Jagdish Purohit. Further investors in BCSL, like BhuvaniaVinimaya Pvt Ltd; Zensar Me....
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....ors. Investigation Wing, Kolkata has gone to even the registered offices of many such cash depositing firms, but as expected there was no existence found for any such persons/firms. Almost all such accounts were opened with fake addresses. Role of banking authorities is also highly questionable here. Same is true, in the case of Paper/Jamakharchi/bogus Clients also Though they are registered as a client with share brokers, and Brokers maintains KYC for such bogus clients also, but these clients does not exists at their given registered address. In many cases it was found that such client companies are missing, or existing nowhere. Even the person of share broker could not find its clients. When share brokers were confronted with this, they either accepted that such clients are bogus or they failed to make any reasonable explanation. Master Table of the Cash Trail SL NAME OF JAMAKHARCHI/BOGUS CLIENT COMPANY AMOUNT OF CASH TRAIL (Rs.) NAME OF CONCERNED SHARE BROKER 1 DEBDARU PROMOTERS PVT. LTD 28 Crores RELIGARE SECURITIES LTD 2 DUARI MARKETING PVT LTD 162 CRORES THE CALCUTTA STOCK EXCHANGE LTD. 3 HEADFIRST VINIMAY PVT LTD 8 CRORES T....
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....o the exit providers to open an account with brokers & purchase the shares in huge quantities from beneficiaries so that safe exit can be provided. It is also seen that most of the beneficiaries are big businessmen & require tax free funds in form of LTCG in huge quantity. Due to this reason the sizeable amount required to be maintained as balance in the exit provider's account with broker. It is seen that Investigation Wing, Kolkata & others have recorded the statements of brokers/persons related with the brokers. Following is the broker wise sale in your case. A statements various brokers was recorded by DDIT (Inv), Kolkata. In those statement, brokers had narrated entire modus operandi and confirmed role of paper companies as an operator for scrips like BCSL, FTL& PTI. Thus it is found that there is a group of persons working in tandem to provide arranged capital gain by receiving cash in lieu of it. It is seen that some exit providers / cross purchasers have helped you for sale of your shares. M/s Divya Drishti Traders Pvt Ltd is one of such party. A sample cash trial of this concern with other party is also mentioned above. It is seen that other exit providers / conc....
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....e and subsequent submissions made by the assessee and there is no requirement of the AO as per this Para of notice. In second Para, it is seen that AO has noted about the facts in respect of assessee's claim of Long Term Capital Gain in various Assessment Years i.e. 2012-13 to 2015-16 and amounts thereof and name of the companies for which shares were sold and Long Term Capital Gain was earned by the assessee. Thereafter in Para 3 of this notice, the AO is making allegation that the Long Term Capital Gain shown by assessee is not natural but is arranged one. As per this Para also, there was no requirement of AO which was required to be complied with by the assessee. In Para 4 of this notice, the AO himself says that these are general preface and in this Para, the AO is noting about background of investigation carried out by the investigation wing of the department and hence, in this Para also, there is no requirement of AO which was required to be complied with by the assessee. In Para 5 of this notice, the AO has jotted down certain circumstantial / direct evidences which are against the assessee's claim of LTCG. In Para 6 of this notice, the AO says that in view of the circumstan....
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.... out of three preconditions for invoking the provisions of section 144, in the present case, none of these three conditions is existing because the assessee has filed the return of income as well as complied with the notice issued by the AO u/s. 142(1) of IT Act. We have seen as discussed above that the only requirement of notice issued by the AO u/s. 142(1) on 13.01.2017 was this that assessee should attend along with the books of accounts on 24.01.2017 and this is not the case of the AO that the assessee has not appeared before him along with the books of accounts. In our considered opinion, in the facts of present case as discussed above, this judgment of Hon'ble Calcutta High Court is squarely applicable in which it was held that if the conditions precedent for the assumption of jurisdiction under Section 144 of the Act are not present, the order of assessment u/s. 144 must be struck down as being without jurisdiction. Respectfully following this judgment, we hold that in the present case also, the conditions precedent for the assumption of jurisdiction u/s. 144 were not present and therefore, the assessment order passed by the AO u/s. 144 of IT Act deserves to be struck down a....
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.... has no impact on the action to be taken by the assessee and hence, in our considered opinion, this judgment cannot be stretched to hold that recording of combined reasons for more than one year renders the reassessment bad in law. This objection has no merit. 22. Now we examine the applicability of the tribunal order rendered in the case of Ritu Sanjay Mantry vs. ITO (Supra) cited by the Learned DR of the revenue. We find that in Para 3 of this tribunal order it is noted in that case that information was received by the AO from o/o DGIT (C & IB), New Delhi that the assessee in that case has taken accommodation entry from M/s Mahasagar Securities Pvt. Ltd., (a company in the Mahasagar Securities Pvt. Ltd. group share scam case) of Rs. 10,32,289/- and based on this concrete information, the AO issued notice u/s 148 after recording the reason for the same. Under these facts, validity of reopening was upheld by the tribunal in that case. In the present case, as per the reasons recorded by the AO for reopening as available on pages 147 to 149 of the paper book, the AO has noted the year wise company wise LTCG as per return of income filed by the assessee for these four years and the....
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....f-line through preferential allotment or off-line sale. The beneficiary (an individual) holds the shares for one year, the statuary period after which LTCG is exempt u/s 10(38) of the Income tax Act, 1961. In the meantime the operators rig the price of the stock and gradually rise its price many times, often 500 to 1000 times. This is done through low volume transaction indulged in by the dummies of the operator at a predetermined price. When the price reaches the desired level the beneficiary who bought the shares at a nominal price, is made to sell it to a dummy paper company of the operator. For this, unaccounted cash is provided by the beneficiary which is routed through a few layers of paper companies by the operator and finally is parked with the dummy paper company that will buy the shares." 23. From the above Para containing modus operandi of the racket of bogus entry operators, it is noted that as per the same, shares in question are held for one year. In the present case, the shares of the first company i.e. M/s Blue Circle Services Ltd. were purchased on 14.09.2010 and were sold during 15.11.2011 to 21.06.2013, which means that these shares were held by the assessee f....
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....there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in s. 34 of the Act of 1922, at one time before its amendment in 1948, are not there in s. 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence." 26. In the light of this judgment, we now examine the facts of the present case to find out as to ....
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....th the dummy paper company that will buy the shares. 4. Further, it may be mentioned here that the price of the shares of the penny stock companies are rigged and are raised through circular trading. This is managed by the "Operator" of the scrip. An "Operator" is a person who is managing the overall affairs of the scheme and he is the one who contacts the entities who wish to take entry of bogus LICG/STCL in their books and arranges the same through the scrips of penny stock companies. The Operator manages many paper/bogus companies and uses them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on exchange, are always closely held and are controlled by the promoter of the Penny Stock Company and the Operator who is arranging for the bogus LTCG/Loss. This is due to the fact that the general public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares. If the beneficiary say, '8' bought 10,000 shares of company "P" @ Rs. of 1/- per share and sold it @ Rs. 1000/- per share, he would make on paper capital ....
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....sed on the above information received from different sources, a survey action u/s 133A of the IT Act was carried out in his case on 12/05/2015 by the DDIT(Inv.), Bangalore and on 20/09/2016 by the undersigned. 7. Based on the evidences gathered during the survey proceedings and statements of various persons in connection with M/s Blue Circle Services Ltd & M/s PS IT Infrastructure & Services Ltd (formerly known as Parag Shilpa Investments Ltd) recorded by various authorities of Income Tax Department, I am satisfied that, assessee has claimed LTCG from M/s Blue Circle Services Ltd & M/s PS IT Infrastructure & Services Ltd (formerly known as Parag Shilpa Investments Ltd) & Fact Enterprises Ltd as exempt income which is prima-facie bogus claim and it requires to be taxed. Issue notice u/s 148 of the IT Act,1961." 27. From the reasons reproduced above, it comes out that the AO has noted year wise company wise details of LTCG shown by the assessee and thereafter, the AO has noted about the investigation carried out by Directorate of Investigation, Kolkata along with Modusoperandi of Penny Stock Operators along with manipulation of share market, accommodation entry for bogus LTC....
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.... the paper book, there is no LTCG on account of sale of shares of this company i.e. M/s Blue Circle Services Ltd. In fact, as per the reasons recorded by the AO also, sale of shares of this company has taken place in three years i.e. A. Y. 2012 - 13 & 2014 - 15. 29. In A. Y. A. Y. 2012 - 13 details of LTCG available is available on page 241 of the paper book and as per the same, there is LTCG on sale of 4 companies in addition to sale of shares of M/s Blue Circle Services Ltd. but these four companies do not include the name of the second company in dispute i.e. M/s PS IT Infrastructure & Services Ltd. (Formerly known as Parag Shilpa Investment Ltd. PSIL). In fact, as per the reasons recorded by the AO also, sale of shares of this second company has taken place in two years i.e. A. Y. 2014 - 15 & 2015 - 16. Hence, we examine the details of LTCG for A. Y. 2014 - 15 as available on page 310 of the paper book and we find that the shares of this company were acquired on 20.07.2012 and sold during 04.03.2014 to 28.03.2014. As per the details of LTCG for A. Y. 2015 - 16 available on page 349 to 350 of the paper book, we find that the shares of this company were acquired on the same da....