TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 1136
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....ncome Tax Act, 1961 (the Act) as there was no case of erroneous order and/or order prejudicial to the interest of revenue. All the facts were duly considered at the time of assessment made u/s 143(3) of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. Pr.CIT-2, Kolkata erred in passing the order u/s 263 of the Act which is contrary to the material on record and provisions of the Act, unjust and bad in law as follows:- a. On the facts and circumstances of the case and in law, the Ld. Pr.CIT-2, Kolkata erred in holding that Assessing Officer (A.O.) passed the order dated 28.04.2017 u/s 143(3) of the Act for impugned assessment year 2015-16 by giving contradictory observations/conclusions that the A.O. did not make any inquiries at all about the issue of short term capital loss. b. On the facts and circumstances of the case and in law, the Ld. Pr.CIT-2, Kolkata erred in holding that Assessing Officer (A.O.) passed the order dated 28.04.2017 u/s 143(3) of the Act for impugned assessment year 2015-16 by giving contradictory observations/conclusions that the A.O. did not make any inquiries at all about the issue sale of shares and to ad....
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....(Penny stock tab in ITS)". During the relevant F.Y. your company had invested in six penny stocks against which a short term capital loss of Rs. 1,09,87537/- was claimed. But during the assessment proceedings, the point was not taken into consideration by the Assessing Officer. The Directorate of Investigation, undertaken an Kolkata, had investigation regarding the accommodation entries of Long Term Capital an (LTCG), and was able to identity a number of beneficiaries who had together taken bogus entries of LTCG of huge amounts. This had led to the identification of Penny Stocks' which were used for generating such bogus LTCG. Various enquiries have been conducted by the Directorate of Investigation, which have resulted in the unearthing of a syndicate of Entry Operators, share brokers and money launderers, involved in providing bogus entries of LTCG/Short Term Capital Loss. It has come to light that large scale manipulation has been/ is being done in market price of shares of certain companies listed on the Bombay Stock Exchange by such syndicate in order to provide entries of tax exempt bogus Long Term Capital Gain to large number of persons in lieu of unaccounted cash.....
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....d with these submissions and held the assessment order to be erroneous insofar as prejudicial to the interest to the revenue thereby setting aside the assessment order to be framed afresh after considering the following observations made in the impugned order. The relevant extract is reproduced hereunder:- "I have carefully considered the facts of the case and gone through the submission of the assessee. The submission of the assessee company has already been discussed in the above Para 5, therefore, the same is not reproduced here again. On perusal of the assessment record, it is seen that, the case was selected for Scrutiny under CASS on the reason "Suspicious Sale transaction in shares and claiming Long term Capital Gains/Short Term Capital Loss shown in return of income (Penny stock tab in ITS)". During the year under consideration, the assessee company had invested in six penny stocks against which a short term capital loss of Rs.1,09,87,537/- was claimed. But during the assessment proceedings, the AO had not taken into consideration on this issue. In this regard, the Directorate of Investigation, Kolkata, had undertaken an investigation regarding the accommodation entries o....
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....es and also referring to another paper book containing 34 pages, asserted the fact that even if the alleged shortterm capital loss is disallowed there will be no prejudice to the revenue because the tax paid by the assessee under the minimum alternate tax shown in the income tax return will still be higher. Further referring to the probable computation of total income considering the disallowance of short-term capital loss, it was submitted that the income tax under the normal computation after disallowing the alleged short term capital loss would work out to Rs.26,66,108/- whereas the assessee has already paid the tax under the MAT at Rs.32,83,167/- and, therefore, even after disallowing the loss there will be refund of Rs.1,10,570/- and, therefore, since no prejudice is caused to revenue, the proceedings u/s 263 of the Act are liable to be quashed. 7. Per contra, the ld. D/R, vehemently argued supporting the order of the ld. Pr. CIT and also referred to the order of the Whole Time Member of the Securities and Exchange Board of India (SEBI) showing that one of the alleged penny stock companies in which the assessee has dealt, namely, Mishka Finance and Trading Limited, the activi....
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.... said short term capital loss, the tax paid by the assessee under Minimum Alternate Tax (MAT) is higher. 9.2. Now, as far as the first contention of the assessee that, the ld. Assessing Officer has examined the transactions, we find that the assessee's case was selected for scrutiny for three reasons of which one was "Suspicious sale transaction in shares and exempt long terms capital gains shown in return (penny stock tab in ITS)". Now referring to the notice issued 142(1) of the Act placed at page 39 & 40 of the paper book, it is noticed that certain details were called for to which the assessee filed replies on 18/01/2017, 06/02/2017, 03/03/2017, 22/03/2017 & 03/04/2017. Except for the reply given on 03/03/2017, in para 4, wherein it is stated by the assessee that complete details of short term capital loss of shares scrip-wise as well as mutual fund and date-wise have been filed in the record and the assessee company has no dealing in any shares in short term capital gain or long term capital gain which are suspicious. Apart from this, there is no other detail filed by the assessee company. Also there is no enquiry specifically raised by the assessee company about the alleged ....