TaxTMI 
TaxTMI 
2025 (7) TMI 185
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....essee, the AO proceeded to make additions u/s 68 of the Act on account of alleged bogus LTCG and consequently made additions u/s 68 and also u/s 69 of the Act on account of alleged commission paid by the assessee to the brokers. 3. Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A), but the same was dismissed. Against this order, the assessee has preferred the present appeal before us on the ground mentioned hereinbelow: "1. Appellant contends that the Assessing Officer and the Appellate Authority erred in reopening of assessment proceedings just on the basis of information received from DGIT (Inv.) Kolkata without forming their own independent satisfaction/opinion which is bad in law and the assessment proceeding is liable to be quashed. Appellant contends that Assessing officer has reopened assessment proceedings solely on the basis of information received from DGIT (Inv.) Kolkata without making any further inquiries, without forming his own independent satisfaction that income has escaped assessment, further reopening of assessment proceedings was just on the basis of information received from DGIT (Inv.) Kolkata with due app....
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....erred in treating sales consideration received from sales of shares of M/s. JMD Telefilms Limited as unexplained cash credit and added it to the total income of the assessee under the head Income from other sources, without taking into the considering documents and legal submissions made by the A.R. of the assessee during the course of the assessment proceedings for justification of assessee appellant claim with respect to Long Term Capital Gain from the sales of Shares of M/s. JMD Telefilms Limited. 5. Appellant contends that, Assessing Officer and Appellate Authority has outrightly rejected appellant claim for Long Term Capital Gain from sales of shares of M/s. JMD Telefilms Limited of Rs. 6,59,81,605/- without bringing on to the records or in the assessment order any material evidence against the assessee that the assessee was one of the beneficiaries of bogus entries of capital gain in the scrip of M/s, JMD Telefilms Limited. 6. Appellant contends that, the Assessing Officer and the Appellate Authority erred in ignoring the fact that sale consideration from sales of shares of M/s. JMD Telefilms Limited has been duly reflected in return of income after reducing....
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....ing, is only 77, whereas the assessee, in fact, carried out 291 transactions. Lastly, the statement of Mr. Jaikishan Poddar of Consortium Capital Pvt. Ltd. was recorded, wherein the AO has mentioned that the alleged transactions entered into by the assessee were confirmed from the statement of Mr. Jaikishan Poddar, whereas the name of Mr. Jaikishan Poddar of Consortium Capital Pvt. Ltd. does not appear anywhere in the order of assessment. 8. All these points/discrepancies were pointed out by the assessee in the reasons recorded by filing her objections vide letter dated 23.08.2017. It is important to mention here that although the AO had disposed of the objection filed by the assessee vide its order dated 30.08.2017, but stating the same figure of Rs. 9,75,08,667.65 as mentioned in reasons for reopening which goes to show that the AO had not applied his mind while disposing of the objections filed by the assessee. We are of the considered view that Section 147 of the Act empowers the AO to reopen the assessment if the additions prescribed therein are satisfied. The basic condition is that the AO has reasons to believe that any income chargeable to tax has escaped assessment for ....
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....threshold for "reason to believe". 13. Therefore, we are of the considered view that merely placing reliance on any other authority without recording own satisfaction or bringing any cogent substance on record shows that, without applying his mind, the AO has issued the notice, which is invalid. Since the AO has formed his reason to believe just on the basis of the information received from the Director of Income Tax (Inv.), Kolkata, that income has escaped assessment and not a reason to believe which is necessary for reopening of the assessment proceedings. In our view, the AO cannot reopen the assessment merely on the basis of information received without applying his independent mind to the information and forming an opinion. 14. Reliance is also placed in the case of PCIT 5. Mumbai vs. Shodiam Investment Private Limited ITA 1297 of 2015, wherein it has been held s under: "14 Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clear....
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....iod (2009-2012) showed increased net sales and profits. However, SEBI noted that the financial fundamentals did not justify the significant rise in the scrip's price during this period. * Key announcements included a preferential allotment of 50,00.000 equity shares at Rs. 17 per share to 45 non-promoter entities on April 2, 2009 (with a lock-in period until February 25, 2010) and a stock split on July 3, 2009, converting each Rs. 10 face value share into ten Rs. 1 face value shares. * SEBI's investigation revealed that certain entities engaged in price manipulation of the JMD Telefilms scrip during the specified period, violating provisions of the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2013. Enforcement actions were initiated against specific entities/ person. Patch 1 Period 02.04.2009 - 12.06.2009 Not Assessee's Period of Transaction Patch 2 Period 15.06.2009 - 12.07.2009 Not Assessee's Period of Transaction Patch 3 Period 03.07.2009 - 14.08.2009 Not Assessee's Period of Transaction Patch 4 Period 15.08.2009 - 03.12.2009 Not Assessee's Period of Transaction Patch....
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.... any wrongdoing. 24. It is important to mention that the report does not suggest that every transaction in the scrip. particularly in Patch 6, was manipulative. Therefore, punishing the assessee, who is not named or implicated by the SEBI or any other agencies, for the actions of unrelated parties is contrary to the principles of natural justice and fairness. 25. We are of the considered view that just the modus operandi, generalization, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected. Reliance is placed on Hon'ble Mumbai ITAT bench in the case of Vijayrattan Balkrishan Mittal vs. DCIT CC-8(1) [ITA No. 3427-29/Mum/2019], wherein it has been held as under: "An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee's action giving his involvement in the scam should be established. ....
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....case, we found that the SEBI has not issued any notice to the assessee or broker of the assessee in relation to these trades. The assessee submits again that it has never received any notice for violating the SEBI Rules or regulations. 30. Therefore, the AO has made a baseless allegation and put reliance of the Investigation report, without any substance and corroborative evidences. The SEBI Report reproduced by the AO in the assessment order has nothing to do with the assessee. If some person manipulates the trades in JMD Shares does not mean that the assessee was also involved. There is no evidence from AO or in the report reproduced by the AO in assessment order. 31. Therefore, the addition made by placing reliance on the SEBI stands deleted, and the above-ground stands allowed. 32. Ground Nos. 4 to 7: All the grounds are interrelated and interconnected and relate to challenging the order of Ld. CIT(A) in upholding the additions made by the AO. Therefore, we have decided to adjudicate these grounds through the present consolidated order. 33. From the records, we notice that during the course of the assessment proceedings, the assessee submitted all the details and do....
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....he Act. The SEBI Investigation report neither mentioned the assessee name or the assessee's broker name. The Investigation report by SEBI was first reproduced in assessment order without giving the opportunity to the assessee to rebut the so called report of SEBI in case of JMD Telefilm Limited. 37. The AO, at the end, while completing the assessment proceedings, made the addition of Rs. 6,67,42.582/- u/s 68 of the Act to the total income of the assessee by treating the sales consideration received from the sales of shares of M/s JMD Telefilms Limited as 'unexplained cash credit' and added it to the total income of the assessee under the head "Income from Other Sources" even though the above sale consideration has been duly reflected in the return of income after reducing the cost of investment as "Long Term Capital Gains" and the same has been claimed as exempt income u/s 10(38) of the Act. 38. The assessee had sold the impugned shares through the recognised stock exchange through reputed registered brokers, wherein the purchasers and sellers are not aware of the other's identities. Accordingly, there was no way for the assessee to know the persons/entities to whom t....
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....stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance of the Hon'ble Non-hrisdictional High Court. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value than the decision of Hon'ble Non-Jurisdictional High Court on the Tribunal." (b.) The Ld. CIT Appeal in impugned order ignored the decision of the Hon'ble Jurisdictional High Court of Bombay in Shyam Pawar case 229 Taxmann 256, which have dealt with the burden of proof on the assessee and the revenue and concluded that without establishing by way of cogent evidence as to how the assessee was in collusion with the alleged operators, transactions on recognised stock exchanges proved with third party documents could not be faulted. "5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Suresh kumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of t....
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.... have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available the transactions. The generated and prescribed by the Stock Exchange. From this material. In para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on th....
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....he Long-term capital gains on sale of "penny" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity. The fact of the case in this case is reproduced here: The assessee, an individual, filed her return of income for A.Y.2005-06 on 04/08/2005 declaring income of Rs. 1,19,653/- after claiming the income from long term capital gain (LTCG) of Rs. 93,00,012/- on sale of listed equity shares and subjected to STT as exempt under section 10(38) of the Income Tax Act, 1961 (in short 'the Act'). The return was processed under section 143(1) of the Act and the case was subsequently taken up for scrutiny. In the course of assessment proceedings, the Ld. AO observed that the shares of Shukun Constructions Ltd. (hereinafter referred to as 'the said shares') are nothing but penny stock and that the assessee has back dated the purchase of the said shares in transactions to generate artificial gain. He required the assessee to substantiate her claim of exemption on the capital gai....