TaxTMI 
TaxTMI 
2025 (6) TMI 575
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed to any tangible material. FACTUAL BACKGROUND 3. The Petitioner was working as an employee in M/s Laureate Education Pvt. Ltd. and filed his return for AY 2014-15 declaring taxable income of Rs. 7,86,72,780/-. The petitioner paid a tax of Rs. 2,07,95,141/- on the declared income. 4. Thereafter, the Petitioner's case was selected for scrutiny and notices under Section 143 (2) and Section 142 (1) of the Act were duly served on the Petitioner. The Petitioner had earned long-term capital gains amounting to Rs. 9,81,71,989/- in the previous year relevant to AY 2014-15. The Petitioner had also incurred short term capital loss on the sale of its shares in India Infotech and Software Ltd. [IISL] and SRK Industries Ltd. [SRK] amounting to Rs. 4,25,94,622/-. The net capital gains offered by the Petitioner for taxation was Rs. 5,55,36,505/-. 5. After examining the documents and hearing the Petitioner, the Respondent No. 1 passed the Assessment Order dated 25.07.2016 under Section 143 (3) of the Act, accepting the return of income of the Petitioner. However, on 30.03.2019, the Respondent No. 1 issued the impugned notice as he had reason to believe that the income of the Petitioner had e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iled to comply with the directions passed by this Court vide Order dated 21.11.2019 as it has not disclosed how the Petitioner is connected with Mr. Anil Kedia, Director of M/s Excel Stock Broking Pvt. Ltd. [Excel], whose statement was recorded under Section 131 of the Act. It was further submitted that there is nothing in Mr. Anil Kedia's statement which links the Petitioner to Excel and that the Petitioner has never had any dealings with Excel nor with Mr. Anil Kedia. It was also submitted that the Petitioner instead carried out its trade on the Bombay Stock Exchange [BSE] through his registered broker, namely, Elite Wealth Advisors Limited [Elite]. 11. It was submitted that the shares were traded at the online trading platform of the BSE and time stamped contracts were issued by the registered broker. It was further submitted that the Petitioner paid the entire consideration for the purchase of share through proper banking channels and received the proceeds of the same in his bank account. 12. In view of the foregoing submissions, learned Counsel for the Petitioner submitted that the Assessing Officer [AO] had no reason to believe that income had escaped assessment for AY 2014....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d penny stock have been rigged in synchronized way to provide accommodation entry to various beneficiaries. During the course of search action, entry operators as well as beneficiaries had admitted that shares of Indian Infotech & Software Ltd have rigged up to provide bogus accommodation. Statement of Sh. Ani1 Kedia, Director of the share broking company M/s. Excel Stock Broking Pvt. Ltd. was recorded on oath wherein he accepted that his broking company is involved in manipulative trading of shares and they have provided accommodation entry of bogus accommodation entry to various beneficiaries. In his statement recorded on oath Sh. Anil Kedia in response to question No. 13 replied as under:- "Yes, I admit the fact. All these companies are being controlled by mostly by our group individuals or some other accommodation entry operator with the sole purpose of facilitating accommodation entries of pre-arranged bogus LTCG/STCL. These companies have been used for trading through our share broking company for facilitating such accommodation entries of pre-arranged bogus LTCG/STCL to different beneficiaries." The beneficiaries of short term capital loss are entities which are having r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Lakhmani Mewal Das, (1976) 3 SCC 757 held as under: "8. The grounds or reasons which lead to the formation of the belief contemplated by Section 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income Tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income Tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot he merely a pretence. It is open to the court to examine whether ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the Income Tax Authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income Tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r contended that the Investigation Wing is a part of the Income Tax Department and their conclusion is based on thorough analysis of the available material. 26. This Court has analyzed the following information based on the reasons rendered by the AO for the issuance of the impugned notice, in addition to the submissions made by the parties: * The Petitioner's case was reopened based on the information received from the Office of the Assistant Director of Income Tax(Inv.) - Unit 3(1), New Delhi vide letter dated 14.03.2018, which revealed that the BSE listed penny stock of IISL has been rigged in a synchronized way so as to provide accommodation entry to multiple beneficiaries. * Further, an Investigation Report circulated from the office of the Principal Director of Income Tax (Inv.), Kolkata had identified the scrips of SRK as one of the BSE listed penny stocks. * Thereafter, the Statement of Mr. Anil Kedia was recorded on oath wherein he accepted that his brokerage firm was involved in the manipulation of trading of shares, in order to provide bogus accommodation entry to various beneficiaries. It is noted that Mr. Anil Kedia also provided a list of penny stock companies ....