TaxTMI 
TaxTMI 
2022 (2) TMI 568
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....ss total income of Rs. 86.03 lacs (rounded off). The return filed by the petitioner was accepted under Section 143 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') without scrutiny of the return. For reopening of the assessment, the assessing officer issued the impugned notice. In order to issue the notice, the assessing officer had recorded detailed reasons. The reasons read as under: "Reasons for the belief that income has escaped assessment 1. Brief details of information collected/ received by the AO During the searches conducted by the department, it is discovered that various syndicates have arranged accommodation entry of bogus LTCG, bogus STGC, bogus Long/Short Term Capital Loss through trading of shares of Penny stocks. The modus operandi found is that the investors/beneficiaries hold these shares for one year or so and then sell it to one of the shell private limited companies of the operator. The price of the shares are manipulated by regular trading by set of people. These facts were confirmed by the stake holders viz. Operators/Syndicate members/Brokers which were providing accommodation entries in statements recorded during....
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....directors of the Penny Stock companies which are indirectly controlled by them through such dummy directors. The whole operation is managed by them. They get the net commission income from the transactions. Their name however, seldom appears in the actual transactions. ii) The Brokers They are registered brokers through whom shares are traded both online and off-line. They are fully aware of the nature of transactions and get paid a commission over and above their normal brokerage. Some of the big broking houses are also indulging in such transactions mostly through sub-brokers. This company has given a large number of terminals to subbrokers who are dealing into this type of transactions. iii) The Entry Operators. They are individuals who control a large number of paper/shell companies which are used for routing cash for the transactions as well as buying and selling shares during the process of price rigging. They work for commission to be paid by the Syndicate Members. To cut cost sometimes in smaller operations, the same group perform more than one function. 2.2 The Transaction The transaction involves three legs. (....
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....provisions of the SEBI Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003 (hereinafter referred to as "PFUTP Regulation"), Securities and Exchange Board of India hereinafter referred to as 'SEBI initiated investigation relating to buying, selling or dealing in the shares of certain scrips to ascertain whether there was any violation of the provisions of the Securities and Exchange Board of India Act, 1992. Vide order no. WTM/AB/EFD-I/DRA-1/14/2019-20, SEBI passed interim orders under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 banning trading in some penny stocks including M/s Lifeline Drugs and Pharma Limited (Now known as Arihant Multi Commercial Limited) restrained certain market entities from accessing securities market on the basis of its investigation suspecting evasion. Thus, the script is already proved to be penny stock in nature and SEBI has done substantial amount of work to investigate the persons and circumstances upon which the manipulations in the prices has been done in this script. The undersigned has gathered the financials of the s....
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....y. Thus, the assessee have earned a the (bogus) Long term capital Gain of Rs. 2,47,99,000/ in the following circumstance: * By investing in an unknown company * By being fortunate that the price of the scrip decreased in the absolute absence of any financial fundamental * By selling his shares to entities which do not even exist and are of no means and could not have bought the shares from their own funds * Despite SEBI, the domain regulator finding that there was price rigging and manipulation in trading of the scrip * Assessee investing in limited scrips mentioned above whose financials were not strong. * Assessee not being a regular investor in Market. As per CIB information available in the case of said assessee, it is noticed that the assessee has sold shares of "Life Line Drugs & Pharma Limited" during F.Y. 2014-15. The assessee has sold 1,08,000 shares of Life Line Drugs Pharma Limited (Scrip Code 506113) for a total sale consideration of Rs. 2,54,47,000/ during F.Y. 2014-15. It is also observed that the assessee has claimed exempt income of Rs. 3,43,94,500/-u/s 10(38) of the Income Tax Act, 1961 in his ....
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....he Income Tax Act as income chargeable to tax has escaped assessment for the said A.Y. by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the said A.Y. 9. Escapement of income chargeable to tax in relation to any assets located outside India :- Nil 10. Finding of the AO on true and full disclosure of the material facts necessary for assessment under proviso to Section 147 As the assessee had made transactions of sale of shares of penny stock company i.e. "Life Line Drugs & Pharma Limited" during F.Y. 2014-15 which is involved in rigging of its share prices. Thus, it is clear that the income of Rs. 2,47,99,000/- which is said to have been earned by the assessee on the sale of shares of "Life Line Drugs & Pharma Limited" during the F.Y. 2014-15 and claimed as exempt income in the form of LTCG, is merely a way to route his income from undisclosed sources into books of accounts. This makes it clear that despite the fact that assessee has shown the income as exempt and shares has been shown as investment, it has not made true and full disclosure of the material facts necessary fo....
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....sessing officer had not formed any opinion and, therefore, the concept of change of opinion while seeking to reopen the assessment would not apply. In cases where the return of an assessee is accepted without scrutiny, the assessing officer enjoys a greater latitude to reopen the assessment. This aspect has been elaborated by the Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra) and later on it was reiterated in the case of Deputy Commissioner of Income Tax and another vs. Zuari Estate Development and Investment Company Limited, (2015) 15 SCC 248. In the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra), it was held and observed as under: "16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Ass....
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....Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 19. Inevitable conclusion is that High Court has wrongly applied Adanis case [1999] 240 ITR 224 (Guj) which has no application to the case on the facts in view of the conceptual difference between Section 143(1) and Section 143(3) of the Act." 6. With this background, we may revert to the sole contention raised by the learned counsel for the petitioner, namely, that reasons recorded by the assessing officer are not reflecting the live link or connection for formation of the belief that the income chargeable ....