TaxTMI 
TaxTMI 
2024 (11) TMI 230
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the AO had erred in law and on facts in reopening the assessment and consequentially passing the assessment order despite the fact the same is based on change of opinion, is bad in law and without jurisdiction since the assessment had been reopened not only for the second time but is also based on borrowed satisfaction and on reasons which are based on general and vague material and information received from a third party and not on the basis of case specific material/evidence found in case of the appellant, the ld. CIT(A) ought to held the reassessment order as bad in law and void-ab-initio. 2. The ld. CIT(A) has erred in not appreciating the fact that the order passed by the AO disposing of the objections filed by the appellant company suffers from factual and legal infirmities and the observations therein are merely a repetition of observations in reasons recorded and the AO has not dealt with and/or controverted the basic and factual objections raised on merits of the issue and legal contentions raised by the appellant and hence it cannot be termed as a speaking order as envisaged by the Hon'ble Supreme Court in the case of GKN Driveshaft. Hence the re-assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed on surmises, presumptions and assumptions. 2. The Id. CIT(A) has erred in not considering and appreciating the fact that the trading in shares of Radhe Developers India Ltd, and the resultant loss is genuine and has been carried out on screen based faceless digital platform Le, on a terminal in normal course of trading activity, through BSE/NSE and registered stock brokers, receipts/payments are through banking channels, shares are duly reflected in demat account, purchase and sale is at prevailing market rates and the STT and other Govt. levies on sale of shares have been duly paid. Thus, in absence of any contrary evidence brought on record by the AD to disprove the comprehensive evidences filed, the impugned addition of Rs. 2,94,763/- ought to have been deleted. 3. The appellant states that since it is not the case of the AO that the said alleged bogus transactions have been carried out in connivance with BSE and registered brokers and keeping in view the fact that BSE has also not treated the transactions in the said companies as bogus or sham and having also not classified them as penny stock companies, the impugned addition being based on mere surmises a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....80/-. Return was duly processed u/s. 143(1) of the Act. The case was reopened on 25-03-2015 u/s. 147 of the Act which was finalized on 18-10-2016 thereby assessing the income at Rs. 1,52,50,170/-. Thereafter, the case was again reopened u/s. 147 of the Act after due approval of the Pr. CIT and notice u/s. 148 of the Act was issued on 29-03-2018 which was duly served upon the assessee. In response to the said notice, the assessee filed his return of income on 23-04-2018 thereby declaring income same as original. The assessee vide letter dated 08-05- 2018 sought reasons recorded for reopening the assessment which was provided to the assessee vide letter dated 10-05-2018. Thereafter, notice u/s. 143(2) was issued on 10-05-2018 and served upon the assessee by speed post. Notice u/s. 142(1) r.w.s. 129 of the Act along with the detailed questionnaire was issued to the assessee on 06-09-2018. The assessee has not responded and therefore final assessment was given to the assessee vide notice u/s. 142(1) of the Act dated 25-10-2018. In response to the same, the assessee filed his objections based on reasons recorded for reopening furnished vide letter dated 28-11-2018. The show cause notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has not dealt with/and or prevented the basic and factual objections raised on merits of the issue and legal contentions raised by the assessee and hence it cannot be termed as speaking order as envisaged by the Hon'ble Apex Court in case of GKN Driveshaft (India) Ltd. vs. UOI 259 ITR 19. Hence, the re-assessment proceedings u/s. 147 of the Act and impugned addition both are bad in law and requires to be quashed. The ld. A.R. further submitted that re-assessment order passed by the Assessing Officer was invalid and bad in law as the facts and figures mentioned in the reasons recorded for reopening are incorrect and contrary to the facts and since the transactions in question having been duly recorded in books of accounts. The assessee had furnished complete details regarding the share transactions of the company wise in M/s. Radhe Developers Ltd. during the course of assessment and in earlier re-assessment proceedings and hence the reopening of assessment for second time merely on the basis of some information received from a third party to the effect that the company i.e. M/s. Radhe Developers Ltd. is a penny stock being based on irrelevant analysis is nothing but mere change of o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rlier and subsequent years, including assessment order passed by the earlier Assessing Officer u/s. 143(3) of the Act the trade in shares of M/s. Radhe Developers Ltd. and the resultant profit/loss has been accepted and no addition has been made. The ld. A.R. further submitted that the Assessing Officer in some cases have disallowed only the net loss incurred in trade of shares of M/s. Radhe Developers Ltd. and other companies while allowing profit earned from the same companies and in some cases have disallowed and added the entire purchase/sale value of shares of M/s. Radhe Developers Ltd. or other companies on identical facts and though of such companies were treated to be being stock companies. The ld. A.R. further submitted that such contrary and fluctuations stands in different case itself speaks of the manner in which the addition have been made and thus the impugned addition of Rs. 2,94,763/- in the instant case requires to be deleted on this count itself. The ld. A.R. relied upon the following decisions:- i) NDTV 271 taxman 1 (SC) ii) Calcutta Discount 41 ITR 191 (SC) iii) Bombay Stock Exchange 365 ITR 181 (Bom HC) iv) Parshuram Potterie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing per share (EPS) has been negative in all the four years under perusal. The above figures clearly indicate that there is no commercial logic for the share price of a company having poor financials and no earning potential to rise from Rs. 1.10 to Rs. 28.80. Further, it was also observed that M/s. Radhe Developers Ltd. regularly changes its address which is not possible in normal circumstances and it shows that the company is trying to avoid disclosing correct address details. In view of the same, it is established from this M/s. Radhe Developers Ltd. is a share which floated in a market at close group and its price was also controlled by it. The share was being used to book artificial loss and gains to various beneficiaries. The balance sheet of the company was also not strong. Thus was just a shell company used as tool by a particular group floated in the market to carry out artificial price variations. From analysis of data received from BSE, it was found that the scrutinized trading were made, fluctuation in share price of company was not supported by financials of the company. On analysis the information, the Assessing Officer drew independent satisfaction that the income ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses in those shares. Therefore, reopening per se is valid. It appears that the assessee harping on the issue of shares and trading in shares was discussed in the earlier reopening but the issue of independent scrip besides Chandani Textile Industries Ltd. and Praneta Industries Ltd run separate trading shares than the trading in scrip M/s. Radhe Developers Ltd.. Thus, reopening in this particular case cannot be held as change of opinion and the reopening u/s. 147 is valid. The contention of the ld. A.R. that the objections filed by the assessee company suffers from factual and legal infirmities also cannot be tenable as the Assessing Officer has given the independent finding in respect of trading in shares particularly that of M/s. Radhe Developers Ltd. Therefore, the decision of Hon'ble Apex Court in case of NDTV (supra) is not applicable in assessee's case as though the assessee has disclosed the trading, it has not specifically given the details such as bifurcation of the scrip trading in respect of M/s. Radhe Developers Ltd. at the earlier reopening stage. Thus, the reopening is valid. As regards relates to the contention that prosecution in question was duly recorded in books ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that whether there is an actual syncronised trading between the assessee and that of company scrip i.e. M/s. Radhe Developers Ltd. which has a variation/fluctuation in its pricing at the time of purchase as well as at the time of sale. The details given by the assessee before us was also before the CIT(A) as well as before the Assessing Officer. From the perusal of these orders, it can be seen that the Assessing Officer as well as CIT(A) has not given any detailed finding as to whether the assessee has actively involved in the price manipulation during the assessment year 2011-12. The SEBI report as well as the suspension of the Bombay Stock Exchange is in the year 2015 giving the details of 2012. The involvement of assessee's transaction has not been specifically pointed out either in the assessment order or in the order of the CIT(A). Thus, on merit the disallowance made by the Assessing Officer does not sustain. Thus, ground no. 2 is allowed. 9. In the result, ITA No. 10/Ahd/2024 is partly allowed. Now coming to the ITA No. 11/Ahd/2024 (Vicky Rajesh Jhaveri) 10. The grounds of appeal are as under:- "[1] Assessment order is bad in law and invalid, the same being....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nalysis is nothing but mere change of opinion on borrowed satisfaction, which is not permissible in law and thus impugned reassessment order requires to be quashed as void-ab-initio 5. The Id. CIT(A) has erred in not considering the fact that the AO had failed to furnish the copy of material or evidences relied upon including statements recorded as referred to and relied upon in the reasons recorded, along with an opportunity of cross examination of such persons for initiating the proceedings u/s. 147 of the Act by issuing the notice u/s 148 of the Act. 6. The Id. CIT(A) ought to have appreciated that there is no failure on part of the appellant company to disclose fully and truly all material facts necessary for his assessment. In view of the above, the appellant company submits that both le notice issued u/s 148 of the Act as well as the impugned assessment order passed in pursuance of the said notice requires to be quashed. [II] Addition on account of disallowance of loss in trading of shares of Radhe Developers India Ltd. - Rs. 4,24,999/- 1. The Id. CIT(A) has erred in law and on facts in confirming the addition of Rs. 4,24,999/- on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r companies while while allowing profit earned from the same companies and in some cases have disallowed and added the entire purchase/sale value of shares of Radhe Developers India Ltd. or other companies on identical facts and though all such companies were treated/alleged to be penny stock companies. The appellant states that such contradictory and fluctuating stands in different cases itself speaks of the manner in which the additions have been made and thus the impugned addition of Rs. 4,24,999/- in the instant case requires to be deleted on this ground itself. In view of the above, the addition of Rs. 4,24,999/- being loss incurred in trading of shares of Radhe Developers Ltd. is required to be deleted. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds and to submit additional grounds at the time of hearing of the appeal." 11. There is a delay of 54 days in filing the present appeal for which the assessee has filed the condonation of delay stating the reasons as stated in ITA No. 10/Ahd/2024 and the delay is condoned. Though the factual aspects are almost identical, still the facts of the case is that the original ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee's case as well and the decisions of Hon'ble Supreme Court in case of ND TV, Calcutta Discount as well as Parshuram Potteries and Bombay Stock Exchange (supra) will not be relevant in assessee's case as the reopening u/s. 147 was on the issue of trading in scrip of M/s. Radhe Developers India Ltd. which is more specific centric and cannot be said that the reopening was just a second opinion or afterthought of the Assessing Officer. Thus, ground no. I (1 to 6) is dismissed. Second ground II (1 to 6) here also the Assessing Officer has not doubted the purchase and even not demonstrated whether the assessee was actively involved in price manipulation of the scrip of M/s. Radhe Developers (India) Ltd. There is no nexus pointed out by the Assessing Officer in the assessment order as well as by the CIT(A) in the order. Thus, ITA No. 11/Ahd/2014 is partly allowed. Now coming to the ITA No. 12/Ahd/2024 (Vicky Rajesh Jhaveri) 14. The grounds of appeal are as under:- "(I) Assessment order is bad in law and invalid, the same being based on change of opinion and having been passed without consideration of the objections/submissions filed disputing the validity of notice ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsidering the fact that the AO had failed to furnish the copy of material or evidences relied upon including statements recorded as referred to and relied upon in the reasons recorded, along with an opportunity of cross examination of such persons for initiating the proceedings u/s 147 of the Act by issuing the notice u/s. 148 of the Act. 6.The ld. CITIA) ought to have appreciated that there is no failure on part of the appellant company to disclose fully and truly all material facts necessary for his assessment. In view of the above, the appellant company submits that both notice u/s 148 of the Act as well as the impugned assessment order passed in pursuance of the said notice requires to be quashed. [II] Addition on account of disallowance of purchase consideration of shares Gujarat Meditech Ltd. - Rs. 50,73,595/ 1. The ld. CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 50,73,695) made by the AD being the purchase value of shares of Gujarat Meditech Ltd, merely on surmises and conjectures as well as without verification of facts by mechanically relying upon the various findings, allegations and observations in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case of the appellant. The impugned addition of Rs. 50,73,695/- thus requires to be deleted on this ground itself. 6. The Id. CIT(A) has further erred in not appreciating that the fact that the AO has taken contradictory stands in as much as accepting the profit in trading of shares of various companies while disallowing the loss in trading of shares of same/other companies though all such companies were treated/alleged to be penny stock companies. Such an approach is wholly unjustified and bad in law 7 The Id. CIT(A) has also erred in not considering the fact that the AO has failed to provide the complete details/material/evidences including the information/data collected from BSE, evidence in support of approval obtained u/s.151 of the Act as well as statements recorded, if any, along with an opportunity of their cross examination as referred to and relied upon in the reasons recorded and the assessment order for making the impugned addition of Rs. 50,73,695/-. In view of the above, the addition of Rs. 50,73,695/- being the purchase value of shares of Gujarat Meditech Ltd. is required to be deleted. [III] Notional Addition on account of commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd commodities. The Assessing Officer further observed that there was an information received from DDIT, Inv. Ahmedabad regarding reports of BSE trade data, seized and impounded material and statements of various persons and after examining the same, it was concluded that scrip of Meditech Ltd. and Veronica Production Ltd. are amongst vague companies involved in providing accommodation entries to various beneficiaries. The modus operandi of providing accommodation entries in respect of providing bogus gain/loss is that desirous benefit approach of the main person namely Jignesh Shah through mediators or in some directly for obtaining profit. The Assessing Officer observed that the said Shri Jignesh Shah admitted in his statement on oath u/s. 131 that he had facility of accommodation entry for long term capital gains though Sanjay Shah and Tushar Shah. The Assessing Officer observed that the assessee has entered into transactions with Gujarat Meditate Ltd. which is a penny stock having no definite activity and assessee has been beneficiary of accommodation entries from transaction of shares. After taking cognizance of the details, the Assessing Officer observed that the total trade ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the statement or on the report. The reasoning given herein above in case of Sagar Jhaveri is applicable in present case as well. Hence, the ground no. 1 (1-6) is dismissed. 20. As regards the merits of the case, relating to addition on account of disallowance of purchase consideration of shares of Gujarat Meditech Ltd. the same is based on surmises and conjectures as mentioned by the ld. A.R. The ld. A.R. further submitted that in this case, there was a search in the premises of the entry operator and in fact the Assessing Officer ignored the fact that the trading in shares of Gujarat Meditech Ltd. resultant profit/loss is genuine and has been carried out on screen based faceless etc. plateform through BSE/NSE and with registered stock broker and the assessee has paid security transaction tax (STT) while purchasing and selling the said shares. The assessment order passed by the earlier Assessing Officer in earlier and subsequent years u/s. 143(3), the trading in shares of Gujarat Meditech Pvt. Ltd. and result profit/loss has been accepted by the Department. 21. The ld. D.R. submitted that the purchase was disallowed in the present case and in fact the purchase was doubted by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 148 was also taken by the assessee before CIT (Appeals) which was dealt in detail by the learned appellate authority. 7 Reliance was placed on the decision of Honourable Jurisdictional High Court of Gujarat in the case of Mehrunisa Mohammed Fazal Maniyar Vs Income Tax Officer (2021) 127 taxmam.com 547 (Gujarat) dated 21 20 21 Wherein the Honourable High Court upheld the reopening related to transaction made with bogus concern of Shri Jignesh Shah. The head note of the order is as under: Section 68 read with section 148 of the income-tax Act 1961 Cash credit (Bogus sale of shares) Assessment year 2012-13 Assessee filed his return of income showing exemption of long term capital gain on sale of shares of certain amount Same was accepted without scrutiny and an assessment order was passed An information was received from DDIT (Investigation) that during search conducted upon one JS it was found that he was director in several companies which were actually shell companies not in existence and were engaged in providing bogus accommodation entries regarding long term capital gain on sale of shares and assessee had also sold shares of such company held by and impugne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nchronized trading to book bogus loss 2. The AO also analysed the time of placement of orders by buyers and seller parties which revealed that in some cases there was difference of seconds in the buy order time and sell order time 3. Here it is also important to note that the total trade volume in shares of Gujarat Meditech on 5/11/2011 and 6/11/2011 was 121000 and 96000 respectively Out of the total volume disproportionately large share has been purchased by these companies that is most of the shares sold by the assessee and his Associates were purchased by entities controlled by a single person. 4. It is pertinent to mention here that in case of Penny scrips which is being controlled by entry providers, general public or a person with any financial acumen does not make trade or invest shares since these companies have no financial backing to support their Cyclic rice and fall of price. In this case also it is seen that majority of transactions on date of sale of shares were carried by the assessee and his Associates. It may also be noted that the AR of the SSC argued that in few instances sale order was made 4 hours prior to buy order time however as me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. 12/Ahd/2024 is partly allowed. Now coming to the ITA No. 13/Ahd/2024 (Aarav Financial Ltd.) 24. The grounds of appeal are as under: "[1] Assessment order is bad in lace and invalid, the same being based on change of opinion and having been passed without consideration of the objections/submissions filed disputing the validity of notice u/s. 148 and reassessment proceedings pursuant thereto. 1.The Id. CIT(A) has failed to appreciate that the And reopening the assessment and consequently passing the assert order the same is bad in law and without jurisdiction so the assessment had been reopened not only on the basis of borrowed satisfaction but general and vague material and Information received from a third party and not on the basis of case specific material/evidence found in case of the appellant seated and since there is no escapement of income at all defined in section 147 of the Act which is a condition precedent for issuing notice u/s.148 of the Act, the CIT(A) ought to held the reassessment order as bad in law and void-ab-initio. 2. The ld. CIT(A) grievously erred in not considering the fact that the AO has not disposed off the elaborate o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing in shares of Gujarat Meditech Ltd. and the resultant loss is genuine and has been carried out on screen based faceless digital platform Le, on a terminal in normal course of trading activity, through BSE/NSE and registered stock brokers, receipts/payments are through banking channels, shares are duly reflected in demat account, purchase and sale is at prevailing market rates and the STT and other Govt. levies on sale of shares have been duly paid. Thus, income of any contrary evidence brought on record by the AO to disprove the comprehensive evidence filed, the impugned addition of Rs 25,86,440/- ought to have been deleted. 3. The appellant states that since it is not the case of the AO that the said alleged bogus transactions have been carried out in connivance with BSE and registered brokers and keeping in view the fact that BSE has also not treated the transactions in the said companies as bogus or sham and having also not classified them as penny stock companies the impugned addition being based on mere surmises and conjectures, the ld. CIT(A) to have held the same as wholly unjustified and bad in law. 4. The ld. CIT(A) has grievously erred in ignoring the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be deleted on the basis of AO's stand in other cases of the group entities on identical facts. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds and to submit additional grounds at the time of hearing of the appeal." 25. The ld. A.R. submitted that this is identical to Shri Sagar Jhaveri and the pleadings, therefore, are identical for this assessee's case as well. The factual matrics of the Aarav Financials Pvt. Ltd. is that the original return of income for A.Y. 2012-13 was filed by the assessee on 29-09-2012 declaring income at Rs. 65,96,960/-. Scrutiny assessment u/s. 143(3) was completed on 31-01-2015 wherein the income of the assessee was assessed at Rs. 65,96,960/-. The case was reopened u/s. 147 of Act and notice u/s. 148 of the Act was issued to the assessee on 30-03-2019. Subsequently, notice u/s. 143(2) dated 14-09-2019 was issued to the assessee. In response to the notice u/s. 148 of the Act dated 31-03-2019. The assessee filed return of income on 26-04- 2019 declaring total income at Rs. 65,96,960/-. Copy of reasons recorded for reopening of the assessment for A.Y. 2012-13 was provided to the assessee on 03-0....