TaxTMI 
TaxTMI 
2025 (7) TMI 1106
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....ating to the matters where the ld. CIT-DR represents matters/cases before the Tribunal is of a higher value as compared to the pecuniary jurisdiction provided to the ld. Sr.DR. Therefore, the cases that were to be argued by the ld. Sr.DR could as well be represented by ld. CIT-DR. However, the Bench was of the view that since learned counsel for the assessee was appearing virtually and considering all these facts and circumstances, at the outset, it was opined that while going through the matters in case ld. CIT-DR wants adjournment that shall be granted. Prima-facie with these observations, the matter was taken as heard. 3. At the outset, parties herein conceded that facts and circumstances and the issues involved in all these appeals and the COs are substantially similar and identical, and after considering the submissions of the parties, all these matters were taken up together for hearing and are disposed of vide this consolidated order. Learned counsel for assessee for illustration of the facts referred to ITA No. 92/RPR/2025 & CO No.08/RPR/2025 for A.Y. 2013-14 as the lead case. 4. Brief facts of the case are that assessee has filed his return of income on 31/03/2024 de....
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....lysis was done as per share market fundamentals it is seen that during the year the assessee sale the share of M/s Banas Fianace Limited during the financial year relevant to the assessment year under consideration. After analysis and examination of records, it was found that the assessee sold the share for a consideration of Rs. 2,08,33,750/- during the F.Y 2012-13. 7.2. Share purchase / sale analysis: The shares of the company had been classified as a penny stock. Both purchase and sale of the shares of the company were concentrated within few persons /entities. The exit providers do not have creditworthiness. They were either non-filers or have filed nominal return of income. The enquiries by the Investigation Wing of the Department had also revealed that the company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or short-term capital loss. 7.3. As per the information available in public domain, the earning per share (EPS) of the company was negligible. The net worth of the company was also negligible. Even though the net worth of the company and the business activity of the....
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....devoid of any commercial nature and fell in realm of not being bona fide and, hence, the claim of Long Term Capital Gain is not allowable. (iii) The SEBI has also given findings that the prices of the shares of the company were determined artificially by manipulations and as such the same cannot be a product of market factors / conditions and commercial principals. (e) Failure of Assessee to discharge onus: The assessee has not been submitted to prove with justification the unusual rise and fall in share prices of the company to be natural and determined by market forces. It is, thus, evident that such share transactions were closed circuit transactions and clearly structured one. (f) Ignorance of the assessee about shares and penny stock companies: Assessee was unaware of the financials and fundamentals of the penny stock company, in whose shares the assessee has traded. (g) Financial analysis of the penny stock companies: The net worth of the penny stock company was negligible. Even though the net worth of the company and the business activity of the company was negligible, the share prices have been artificially rigged. (h) Cash trail....
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....arned counsel submitted that facts and circumstances as aforestated are all similar for the appeals of the Revenue and the COs of the assessee. However, even without going into the merits of the matter, learned counsel submitted that though the additions have been made u/sec. 68 of the Act, but the principles of natural justice were not complied with, since the documents which were relied on by the Department and against the assessee, the copies of the same were not provided to the assessee. To demonstrate the same, learned counsel referred to the reasons for reopening for A.Y. 2013-14 which was furnished to the assessee on 09/02/2021 and the same is extracted and made part of this order for the sake of completeness :- "1. Brief details of the assessee: The above named assessee derives income from salary and other sources. The return of income for the Assessment year 2013-14 was filed on 31.03.2014 declaring total income at Rs. 8,85,670/- 2. Brief details of information available: On the basis of credible information available with the department in the case of Banas Finance Limited a penny stock company listed at Bombay Stock Exchange with scrip....
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....ion within 7 days after receipt of this letter." 7. Referring to para 2 of the above mentioned letter of the Department, learned counsel submitted that the credible information which Revenue is referring to such credible information has not been made available to the assessee. That, further referring to para 3 wherein it has been mentioned that "It is found that the company in which the trading activity has occurred is one of the entities which is in the list of the penny stock shares as per CBDT, New Delhi". Learned counsel submitted that such list was never provided to the assessee to refer to and to make relevant submissions before the Department. That, further, learned counsel referring to the relevant part of the draft assessment order show-cause notice dated 24/03/2022 for A.Y. 2013-14 wherein the relevant portion is extracted as follows :- "6. On perusal of the details available and data available with various sources were examined, like ITD data, BSE data, Money-control.com website, Taxmann, Court rulings, Internet as well as report of the Investigation Wing of the Department and findings of Securities & Exchange Board of India (SEBI) following facts emerged: ....
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....s and use them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on Stock Exchange, the companies were, in reality, held as closely held companies and were being controlled by the promoters and the operator, who is arranging for the bogus LTCG/STCL/ Business Loss. This was due to the fact that the general publics were not interested in these shares as these companies had no credentials and these factors helped the operator to keep a control on the price movement of the shares. 6.5. Once the period of one year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at the inflated prices on the Stock Exchange. A point worth noticing emerged during the course of investigation by the Investigation Wing is that the purchase of the shares of the penny stock company is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator, which are referred to as "Exit Providers". The unaccounted money of the beneficiaries is routed to these bogus entities "Exit Providers" and the shares held by the beneficia....
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....ny which is virtually defunct and inoperative." 8. That, in response to the proposed variation in the draft assessment order, the assessee had filed reply which is extracted as follows :- "1. All details related to LTCG which is exempt u/s 10(38) have duly been disclosed in return of income and the relevant documents are submitted on 29.03.2022. It is requested not to pass any order before verifying those documents. 2. No documents which are relied upon by you related to the proposed addition were ever provided to me which is against the law of natural justice and any order passed without providing such documents was held as illegal by Hon'ble Supreme Court in various cases. Further, we would like to invited your kind attention to the Taxpayer Charter issued by the Income Tax Department (attached as Annexure 9), now incorporated in law as section 119A of the Income Tax Act, 1961, which provides a framework to the entire department for its commitment towards the tax payers. In light of the above, we would like to invite your attention specifically to point 1, point 4 and point 14 of the same and based on the same, again make a request to take all the informa....
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....evant documents to the assessee as well. Learned counsel for the assessee responding to the submission of the ld. CIT-DR, agreed with the same, however, submitted that since the additions were made without complying with the principles of natural justice, the same ought to be deleted. 10. Having heard the submissions of the parties and carefully examining the facts and circumstances, so far as the issue of natural justice is concerned, it is crystal clear that as per the show-cause notice, draft assessment order and the reasons for reopening, there are specific information against the assessee with the Department which triggered the concerned addition in the hands of the assessee which however were partly allowed by the ld. CIT(A)-NFAC. But the fact of the matter is, as contended by the learned counsel, the very basis of dispensing justice depends on compliance on the principles of natural justice. The information i.e. "credible information; list of penny stock shares as per CBDT", these were never provided to the assessee for representation of the case. There are no evidence on record to suggest that the said documents were provided to the assessee. In other words, the contenti....