TaxTMI 
TaxTMI 
2025 (2) TMI 1237
X X X X Extracts X X X X
X X X X Extracts X X X X
....stock company listed on BSE with Script Code (511012) and this 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 in their books of account. The trading of equity shares in the scrip was earlier suspended and the suspension was revoked w.e.f. 29.05.2012. The assessee, initially invested in M/s ANAX COM TRADE LTD., which was later merged with M/s Yamini Investments Co. Ltd. (YICL). The assessee was found to have traded for an amount of Rs. 88,11,440/- during the financial year 2015-16 relevant to assessment year 2016-17 and has claimed long term capital gain of Rs. 85,38,145/- as exempt income u/s 10(38) of the Act. 4. Accordingly, the Assessing Officer reopened the case of the assessee u/s 147 after obtaining approval u/s 151 of the Act from the Competent Authority and issued notice u/s 148 of the Act to the assessee on 31.03.2021. The assessee in response to the same filed his return of income on 26.04.2021 admitting the total income at Rs. 11,64,870/-. The Assessing Officer issued notice u/s 143(2) of the Act on 30.06.2021, in response to which the assessee vide letter....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Rs. 10/- shares were spitted in Rs. 1/- paid up and number of shares were multiplied accordingly. Immediately after the company's amalgamation was approved by the Hon'ble High Court on 09.05.2014 the volume of the share trade increased manifold. The operators artificially rigged the price of the shares through circular trade with the help of share brokers and bogus clients to provide bogus Long Term Capital Gain/Short Term Capital Loss to various beneficiaries. The company ANAX COM TRADE LIMITED made private allotment of equity shares of Rs. 10/- each. The company then merged to M/s. Yamini Investments Co. Ltd. and then the scrip was split on 19.02.2015 in the ratio of 10:1. Share price movement of the scrip from public domain shows a sharp price rise in the above scrip in F.Y. 2014-15 and 2015-16 and this sharp rise is not supported by the financials of the company. During the year under consideration the assessee has traded in this scrip for Rs. 88,11,440/-. The share price of M/s. Yamini Investments Co. Ltd. rose from Rs. 119.30 on 06/09/2013 to Rs. 716/- on 18.03.2015 and then fell back to Rs. 230.50 on 09.03.2016. However, the financials of M/s. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....@ Rs. 10 then subscriber will get 1 share of ANAX COM TRADE LIMITED = 1 share of BSE LISTED COMPANY and the sale price of BSE LISTED COMPANY: Rs. 260 and Net gain will be Rs. 250 (sale price Rs. 260-Purchase price Rs. 10). Also application form for subscribing the shares was attached with the said email. The image of this file is reproduced by the Assessing Officer at page 3 of the assessment order. Subsequently, it was found that M/s. Anax Com Trade Ltd. has been merged with M/s. Yamini Investment Company Ltd. During search and survey proceedings at the business premise of Mr. Ram Avatar Agarwal multiple evidences related to M/s Yamini Investment Company Ltd. was found and impounded. 6. After thoroughly analyzing the details, the Assessing Officer noted that the scrip of M/s. Yamini Investment Company Ltd. was managed and controlled to benefit certain pre-decided persons. On the basis of the data analysis, he noted that the assessee is also among the beneficiaries who have received the non-genuine benefit of transactions in the scrip of M/s. Yamini Investment Company Ltd. and availed bogus long term capital gain. Accordingly, the Assessing Officer concluded that the assessee is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the investigation wing on Dutta and Tyagi group dated 16.5.2018 and during the post search enquiries of the case, it has been gathered that the scrip of the M/s. Yamini Investment Company was managed and controlled to benefit certain pre decided persons and the assessee is a beneficiary of Yamini Investments Co Ltd. Scrip in the case of Dutta and Tyagi group. Trade data of the scrip Yamini Investment Co Ltd. and trading patterns was analysed and analysis of this data has proved that the scrip of Yamini was controlled and managed by some individual whose aim was to provide long term capital gain / loss by received cash, This traded value was found suspicious and detailed investigation of this issue was undertaken by the DDIT (Inv). The information has been analysed and examined it has been found that Yamini Investment Co Ltd. (YICL) is a penny stock company wherein prices are artificially moved in a desired/required direction on time to time basis in order to benefit few respective identities. Hence, it is established that the assessee had sold shares of YICL to tune his own financial interest and claimed capital gain of Rs. 85,38,145/- as exempted from sale of shares of YICL. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained on the basis of materials available on record, the surrounding circumstances, the relevant human conduct and the overall balance of probability. Reliance is placed on. a. Sumati Dayal Vs CIT (1995) 80 Taxmann 89 (SC) "It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the act lies upon the assessee. But, in view of section 68 of the Act, where any sum is found credited in the book of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the assessing officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he rails to rebut it the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 5.3.4 Having being put to the test of fact finding, it is observed the transactions have failed the test, more so when read with the test of probability and human conduct, so essential, to arrive at facts. The confirmation documentation remains mere documents and self serving, and they fail as evidence. In the case of DCIT VS Smt. Phoolwati Devi (2009) 314 ITR (AT) 1 (Delhi) the Hon'ble judges have observed at page 9 that "In our opinion, despite the documentation supporting the claim of the assessee superficially, the evidence cannot be accepted in view of the surrounding circumstances and human probabilities" Taking a view of the matter, the assessee's claim that payments through bank the transactions genuine is rejected as being devoid of merit in the light of the surrounding circumstances. 5.3.5 It is seen that merely documenting transaction do not render....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mation from other agencies, or failure on part of the AO during the initial assessment proceedings to account for a portion of the income or allowing of excess loss or depreciation etc. In such a case, the provisions of Section 147 would be applicable and the assessment can be reopened. Explanation 2 to Section 147 enlists other conditions under which the section is applicable (deeming provision); which is when the income has been assessed but there has been under-assessment, the income has been assessed at too low a rate, excessive relief has been provided and/or excessive loss, depreciation allowance or any other allowance has been computed under the provisions of the Act. The very fact that reasons are recorded and notice u/s 148 was issued goes to show that the AO had applied his mind and was satisfied himself about the re-opening of the case. The IT Act envisages that the AO should only have a reason to believe to re-open a case, he need not establish beyond doubt that there is escapement of income before issuing the notice. 4.3.1 The AO is not required to carry out any investigation before reopening as held by Hon'ble Supreme Court in the case of Raymond Woollen ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urisdictional. Therefore, not following the decision of jurisdictional High Court is contempt of the court. 5. The Learned CIT(A) further erred in confirming the re-opening the assessment u/s 147 of the Income Tax Act, 1961 without verifying the details and documents available on the record of the appellant as assessment in the case of the appellant was completed u/s 143(3) of the Income tax Act, 1961 on 09-12-2018 and nothing new had happened between date of order of assessment sought to be reopened and date of formation of opinion by Assessing Officer that income had escaped from assessment. Therefore, reopening of assessment is merely on the basis of a mere change of opinion. 6. The Learned CIT(A) further erred in not considering the various documents including bank statements, share allotment letter, copy of demat account, bills, contract notes etc., in respect of the purchase of shares of Anax Com Trade Limited and sale of shares of M/s Yamini Investment Company Limited and based his findings merely on the basis of the alleged information received from the DDIT/ADIT(Inv.), 3(3), New Delhi through Insight Portal during the course of post search proceedings in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld not be said to be tangible material per se and, thus, reassessment on said basis was not justified. 13. Referring to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del), he submitted that the Hon'ble High Court in the said decision has held that where reassessment was resorted to on basis of information from DIT(Investigation) that assessee had received accommodation entry but there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate live link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. 14. Referring to the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. G and G Pharma India Ltd., [2016] 384 ITR 147 (Del.), he submitted that the Hon'ble High Court in the said decision has held that prior to the reopening of the assessment, the Assessing Officer has to, applying his mind to the material, conclude that he has reason to believe that income of the assessee has escaped assessment. Unless the basic jurisdictional requirement is satisfied, a postmortem ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceived on sale of shares iii) Demat account statement for the period of purchase and sale of shares iv) Share allotment letter on allotment of shares v) Contact notes of sale of shares 20. He submitted that the Ld. CIT(A) / NFAC did not consider the various documents including bank statements, share allotment letter, copy of demat account, bills, contract notes etc., in respect of the purchase of shares of Anax Com Trade Limited and sale of shares of M/s Yamini Investment Company Limited and based his findings merely on the basis of the alleged information received from the DDIT/ADIT(Inv.), 3(3), New Delhi through Insight Portal during the course of post search proceedings in the case of Dutta and Tyagi group. 21. Referring to the order of the Ld. CIT(A) / NFAC in case of the son of assessee Shri Manoj Jaibhagwan Jindal, he submitted that the son of the assessee has also earned capital gain on account of sale of same shares and the Ld. CIT(A) / NFAC has deleted the addition made by the Assessing Officer. However, the Ld. CIT(A) / NFAC has not considered the same although the Revenue has accepted the order of the Ld. CIT(A) / NFAC in case of son of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he case of Chief Commissioner of Income-tax Vs Nilesh Jain (HUF), 163 taxmann.com 229 dated 30-04-2024, he submitted that the Hon'ble High Court in the said decision has held that where assessee purchased shares of a company listed on Bombay Stock Exchange through a D-mat account, with payments made via banking channels and Security Transaction Tax paid, fulfilling all conditions for exemption under Section 10(38), Assessing Officer could not question genuineness of those shares or treat them as bogus to make an addition under Section 68. 25. Referring to the decision of the Hon'ble Supreme Court of India in the case of Principal Commissioner of Income-tax Vs Kuntala Mohapatra 160 taxmann.com 608, he submitted that the Hon'ble Supreme Court in the said decision has dismissed the SLP filed against order of Hon'ble High Court that where shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax assessee was eligible to claim exemption under section 10(38) for long-term capital gains. 26. Referring to the decision of Hon'ble Supreme Court of India in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted that the Hon'ble High Court in the said decision has held that where DMAT account and contract note showed details of share transaction and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68. 30. Referring to the decision of the Hon'ble Bombay High Court in the case of Principal Commissioner of Income Tax-3 Vs Ziauddin A Siddique, ITA No. 2012 of 2017, dated 04-03-2022, he submitted that the Hon'ble High Court in the said decision has held as under: "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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was reopened under Section 148 of the Act. On appeal, the Hon'ble High Court observed the detailed findings of the CIT(A) and concluded that these findings were sound and based on thorough appreciation of the facts and circumstances of the matter at hand. Hence the Hon'ble High Court finds no error in the action of the Tribunal in upholding the findings of the CIT(A). 33. Referring to the decision of the Hon'ble Gujrat High Court in the case of the Principal Commissioner of Income Tax Vs Sandipkumar Parsottambhai Patel, 457 ITR 368, he submitted that the Hon'ble High Court in the said decision has held that where the Assessing Officer treated transactions in purchase and sale of share as sham transactions and sale proceeds of shares were treated as undis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case, on the basis of information received in insight portal from DDIT (Inv) Wing, Unit-3, Delhi that the assessee has traded in the scrips of shell company viz. M/s. Yamini Investments Co. Ltd., which is proved to be a penny stock company listed on BSE and which has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain, reopened the assessment u/s 147 of the Act. Rejecting the various explanations given by the assessee, the Assessing Officer rejected the claim of exemption u/s 10(38) of the Act on such bogus long term capital and made addition of Rs. 85,38,145/- u/s 68 of the Act. We find before the Ld. CIT(A) / NFAC, the assessee apart from challenging the addition on merit, challenged the validity of re-assessment proceedings. We find the Ld. CIT(A) / NFAC upheld the validity of re-assessment proceedings and sustained the addition on merit, the reasons of which have....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such reopening of the assessment is valid or not. We find the Hon'ble Delhi High Court in the case of Pr. CIT vs. G and G Pharma India Ltd. (supra) has observed as under: "12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v/s. CIT 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v/s. Lakhmani Merwal Das 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of reopening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent Assessee has indulged in any activity which could give rise to ....