TaxTMI 
TaxTMI 
2024 (12) TMI 1213
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....ised on 23.09.2016 in which taxable income was declared at Rs. 68,92,570/-. The case was selected for limited scrutiny under CASS. Accordingly, notices u/s 143 (2) and 142(1) of the Income-tax Act, 1961 (for short 'the Act') were issued and served on the assessee. In response, ld.AR of the assessee attended the proceedings from time to time and submitted relevant information as called for. 4. During assessment proceedings, the AO observed that assessee has earned capital gain amounting to Rs. 38,63,362/- from sale of shares of M/s. CCL International Ltd. and Rs. 28,12,941/- from sale of shares of M/s. Channel Nine Entertainment Ltd. Relevant chart of calculation of long term capital gain and short term capital gain are extracted in the assessment order. The AO observed that assessee has earned windfall gains in both the scrips within a period of short span of time. The AO analyzed both the scrip's trade and price movement from March 2013 to March 2017 and analyzed the financials of both the companies and observed that share prices of both the companies rose to astronomical height and the rise of shares is not commensurate with the movement of Sensex during the same period. The c....
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.... sustaining the action of the Ld AO without appreciating that by filing legally admissible evidence as much as contract note, DEMAT A/c, payment of SIT, appellant had discharged the burden cast upon it under the Act. 8. That the impugned assessment order is arbitrary, illegal, bad in law and the violation of rudimentary principle of contemporary jurisprudence." 7. At the time of hearing, ld. AR for the assessee briefly submitted the facts of the case and submitted detailed written submissions, which is reproduced below for the sake of brevity :- 1. That the Appellant is an individual filed his Income Tax Return("ITR") for the AY 2015-16 on 28.08.2015, declaring therein a total income of Rs. 64,24,570/- 2. That the Appellant during the year under consideration, derives income chargeable to tax under the head Income from house property, Income from capital gain, Agricultural income and Income from other sources. 3. A revised return was filed on 23-09-2016, declaring taxable income of Rs. 68,92,570/in which she had offered the amount of short-term capital gain earned as "Income from other sources". 4. The case was selected for complete s....
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.... individuals whose statements formed the basis of the assessment. 15. The Ld. AO disregarded the Appellant's request and proceeded to pass the Assessment Order and confirm the transaction with Channel Nine Entertainment as bogus and taxable under Section 68 of the Income Tax Act, 1961, Consequently, an addition of Rs.29,71,941/- was made to the income of the Appellant. 16. That the Appellant, being aggrieved by the assessment order dated 30.11.2017, preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] challenging the said order. 17. Further, that the Ld. CIT(A) has upheld the assessment order and sustained the addition of Rs. 29,71,941. 18. That the Appellant, being aggrieved by the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)], has preferred the present appeal before this Hon'ble Income Tax Appellate Tribunal (ITAT). A. In Re Ground no. 1 & 2: That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the action of the Ld. AO by confirming the order passed under section 143(3), despite the fact that no notice under section 143(2) was issued subs....
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.... (1) New Delhi ITA no 1020/Del/2019 ".....7. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation to hold that the assessment framed under section 143(3) of the Act deserves to be quashed in the instant case as the initial scrutiny notice issued under section 143(3) of the Act dated 12.04.2016 by ITO was without jurisdiction as he did not possess jurisdiction over the assessee for the A.Y. 2015- 16. Consequently, assessment framed under section 143(3) of the Act is hereby quashed as void ab initio. The additional ground no.2 is hereby allowed..." In the recent case of LSR Foods Ltd., New Delhi v. ITO, New Delhi (decided on 25th September 2024), the Hon'ble Income Tax Appellate Tribunal (ITAT) placed reliance on the aforementioned decision. 24. In light of the above submissions and judicial precedents, it is evident that the failure to issue a mandatory notice under Section 143(2) of the Act, 1961 by the Respondent, renders the assessment proceedings void ab initio and legally unsustainable. B. Ground no. 3 & 6 That on facts and in circumstances of the case ....
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....nt and in the absence of any information/material to the contrary makes the impugned additions unsustainable vide Lalchand Bhagat AmbicaRam v. Commissioner of Income Tax, [1959] 37 ITR 288 (SC) [14-05-1959] "....... Where, however, the fact-finding authority has acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, the Court is entitled to interfere. In our decision in Meenakshi Mills, Madurai v. Commissioner of Income-tax, - Madras (3) after discussing the various authorities on the subject we laid down that: - (3) A finding on a question of fact is open to attack under S. 66(1) as erroneous in law when there is no evidence to support it or if it is perverse." The latest pronouncement of this Court in Omar Salay Mohamed Sait v. The Commissioner of Income-tax, Madras (4) summarises the position thus: - "We are aware that the Income-tax Appellate Tribunal is a fact-finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this Court....
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....ding the purchase and sale of shares through banking channels. The impugned additions, made without consideration of the law and evidences submitted, are legally unsustainable. C. Ground No. 5 & 6 The Respondent has completed the Assessment on assumptions and surmises, without bringing any legally admissible evidence on record, rendering the assessment unsustainable in law and on facts. 30. That the Respondent concluded the assessment relying on investigation reports and statements from various Directorates, none of which disclosed adverse findings against the Appellant or established involvement in bogus accommodation entries. Additionally, the Respondent failed to rebut the Appellant's documentary evidence substantiating the genuineness of the transactions and arbitrarily deemed the LTCG entry as bogus, relying solely on a SEBI report based on preliminary inquiries, (Please refer to pages 28-76 of the assessment order)which lacked any direct nexus to the Appellant's case, rendering the findings unsustainable in law. 31. Further, that no documentary evidence(s) has been brought on record by the Respondent to substantiate the purported allega....
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....The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already extracted above, forming part of the paper book. 32. Furthermore, the Ld. CIT(A) has affirmed the impugned addition of Rs. 29,71,941/- based on mere sudden increase in share prices (evident vide para 7.4 of the Assessment order) which does not ipso facto determine that shares/transaction are bogus vide the jurisdictional High Court ruling in case of Pr. CIT v. Krishna Devi [2021] 126 taxmann.com 80 wherein the Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 33. That the Respondent for the initiation of impugned assessment proceedings placed reliance on purported statements recorded and sudden increase in share price (evident vide para 7.4 of Assessme....
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.... response dated 30.11.2017 to the Show Cause Notice dated 21.11.2017. The said request pertained to the cross-examination of the of the person on whose statements were relied upon by the Ld. AO to conclude that the Appellant's Long-Term Capital Gain (LTCG) income for the relevant year was bogus. therefore, denial of such opportunity for cross-examination violating the principle of natural justice thereby rendering the impugned reassessment void and illegal vide this Hon'ble Tribunal ruling in the case of Vinesh Maheswari v. ITO., [2019] 103 taxmann.com 274. "8.5.... Now adverting to second issue framed above on impact of cross examination, I strongly rely on the following string of decisions of various courts to hold that when revenue strongly relies on statements of certain persons to implicate an assessee, principle of cross examination has to invariably followed if truth and justice needs to be found out. Keeping in view of the facts and circumstances of the case and respectfully following and applying principles in aforesaid Hon'ble Supreme Court, Hon'ble High Court and this Tribunal rulings, on the issue of lack of cross examination and violation ....
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....shifts to the revenue authorities to bring on record any contrary evidence. In the present case, no such rebuttal or evidence has been provided by the Ld. AO. 43. It is submitted that Ld. CIT(A) has erred in sustaining the action of the Ld. AO, disregarding the legally admissible evidence and the settled principle of law. The impugned order is, therefore, unsustainable in law and merits reversal F. Ground No. 8 That the impugned assessment order is arbitrary, illegal, bad in law and the violation of rudimentary principle of contemporary jurisprudence. 44. That the impugned Appellate order passed by the CIT(A) is arbitrary, illegal, and unsustainable in law, having been rendered in complete violation of the rudimentary principles of contemporary jurisprudence, as outlined below: 45. That the assessment order has been passed without fulfilling the mandatory jurisdictional requirement under Section 143(2) of the Income Tax Act, 1961. The Hon'ble Supreme Court in Assistant Commissioner of Income Tax v. Hotel Blue Moon(Supra) has categorically held that the issuance of notice under Section 143(2) is not a mere procedural formality but a juris....
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....ence, violating the jurisprudential principle that mere allegations or suspicions cannot justify additions. 51. On the similar facts Hon'ble ITAT, Delhi Bench in the case of Archit Gupta vs. ACIT (ITA No. 2624/DEL/2022 and 2625/DEL/2022) has held that - ".... the Assessing Officer and Ld. CIT(A) has applied the concept of human probabilities and held the above said scrips to be a penny stock without bringing on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon'ble Bombay High Court in the case of Ziauddin A Siddique (supra). Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the ground raised by the assessee. Accordingly the grounds raised by the assessee are allowed." In view of the above judgment, it is aptly clear that addition on account considering sale of Penny stock as scrupulous transection, without having any conclusive evidence or facts is immaterial and ba....
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....nces of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding tha....
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....rs of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of....
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....ed and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence ....