TaxTMI 
TaxTMI 
2025 (11) TMI 98
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....agged for scrutiny. The information was disseminated through the Insight Portal of the Department wherein the enquiry reports and findings were uploaded. From the information available to the Assessing Officer on the Insight Portal of the Department, it is transpired that the assessee had taken accommodation entry of Rs. 1,88,34,063/- through Long Term Capital Gain (LTCG) on sale of shares. Based on this information, the case of the assessee was reopened under Section 147 of the Act by the AO, after recording the reason and obtaining approval of the competent authority. Accordingly, a notice under Section 148 of the Act was issued on 30.03.2021. The assessee had objected to the reopening of the proceeding and the Assessing Officer vide a separate order had disposed the objection of the assessee. In the course of assessment, the Assessing Officer was not satisfied with the explanation of the assessee regarding the LTCG of Rs. 1,70,55,65/- derived by trading in the shares of M/s. Nyasa Corporation Limited. From the information available with the Assessing Officer, the trading in the shares of penny stock company M/s. Nyasa Corporation Limited was arranged through one Shri Naresh Jain....
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....e Assessing Officer about the escapement of income was without availability of any information with the Assessing Officer. In this regard, he has drawn our attention to the reasons recorded by the Assessing Officer and submitted that paragraph no.-3 of the reason was left blank, which revealed that there was no foundational fact or information available on record with the Assessing Officer. Therefore, the satisfaction recorded by the Assessing Officer was baseless and without any merit. The Ld. AR submitted that the validity of the proceeding under Section 147 of the Act can be considered only on the basis of reasons as recorded before issuance of notice and that the reasons cannot be supplemented later on through the order disposing the objection of the assessee. In this regard, he relied upon the judgement Hon'ble Gujarat High Court in the case of Gujarat Flurochemicals Limited, 319 ITR 282 (Guj.). The Ld. AR further submitted that the Assessing Officer cannot record only some of the reasons and keep back the others to be disclosed before the Court if the action is challenged in court of law, for which reliance was placed on the decision in the case of Kantibhai D. Narola, 436 IT....
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....essing Officer and also verifying the information as available on the Insight Portal. He, therefore, submitted that all the due process was followed in the present case for the reopening u/s 147 of the Act. The Ld. Sr. DR further submitted that there was no bar that proceeding u/s 147 of the Act can't be initiated on the basis of materials found in the course of search of a third party. He, therefore, strongly supported the action of the AO to re-open the case u/s 147 of the Act. Our findings on reopening 7. We have carefully considered the rival submissions. The assessee has challenged the reason as recorded by the Assessing Officer on the ground that satisfaction of escapement of income was recorded by the AO without any foundational fact or information available on record. This allegation has been made on the basis of a missing paragraph in the reasons as recorded by the Assessing Officer. In order to correctly appreciate the facts and to examine the application of mind by the Assessing Officer, it will be relevant to reproduce the reason as recorded by the AO, which was as under: - "In this case, the assessee has filed return of income for A.Y. 2014-15 declaring ....
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....Act." 7.1 The contention of the assessee that the AO had no information for recording the reason for escapement of income is not found correct. The AO had mentioned in the reason that the information pertaining to the case was available on Insight Portal of the Department. Apparently, the information available with the Assessing Officer was intended to be reproduced in paragraph no.-3 of the reason, which is found missing. Merely because the information available with the Assessing Officer was not reproduced in paragraph no.-3 of the reason, it does not mean that the Assessing Officer had no information at all. The omission of paragraph-3 in the reason might be a typographical mistake. The Assessing Officer had discussed the source of the information in paragraph no.-2 of the reason from which it is found that information was disseminated by Directorate of Income Tax (Systems) on the Insight Portal of the Department, after risk profiling based on enquiry reports and findings of the Directorate of Income Tax (Investigation) and Directorate of Intelligence & Criminal Investigation. Thus, the information centrally disseminated by the Directorate of Income Tax (Systems) was availabl....
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....rding of proper reason by the Assessing Officer and he was satisfied about escapement of income in this case. Thus, the facts of the case relied upon by the assessee are totally different from the facts of the present case and the ratio of the said judgement cannot be applied to the facts of the present case. 7.3 The assessee has also relied upon the decision of Hon'ble Gujarat High Court in the case of Kantibhai D. Narola (supra). The Hon'ble High Court has held in that case that the Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanations given by the AO at a later stage in respect of notice of the assessment. The Hon'ble High Court has also held that the sufficiency or correctness of the material/information available with the Assessing Officer was not to be considered at that stage. We have to, therefore, examine whether the Assessing Officer had applied his mind to the materials available with him in order to conclude that the income had escaped assessment. 7.4 The Assessing Officer, in his reason, has mentioned about the information disseminated to him through the Insight Portal along with enquiry reports and findings of....
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....of the reasons as recorded by him. It is not mandatory for the Assessing Officer to share the information as available with him on the basis of which the reason was recorded. The reliance placed by the assessee on the decision of the Hon'ble Bombay High Court in the case of Deshmukh Sahebrao Property Bank (116 CCH 0079) is found to be misleading. In that case, the Hon'ble High Court while disposing the writ petition of the assessee had directed the AO to provide the information along with appraisal report, copy of statement etc. The information based on which the reason was recorded can be provided only as per the direction of the Hon'ble Court and not otherwise. It is further found that the Assessing Officer had disposed the objection of the assessee on the reopening vide order dated 15.11.2021 wherein the AO had also relied upon the decision of Hon'ble Gujarat High Court in the case of Purviben Snehalbhai Panchhigar (101 taxmann.com 393). In that case the Assessing Officer had received information from Investigation wing that the company 'T' was a shell company and shares of said company were basically used for providing bogus claim of long-term or short-term capital gain....
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....transactions of the assessee as accommodation entry. The Ld. AR submitted that the AO had failed to show that there was any corresponding transaction in respect of amount received by the assessee towards sale of shares. According to the Ld. AR, the addition was made with a pre-determined conclusion that the assessee had obtained accommodation entry but no opportunity was allowed to the assessee to cross-examine the entry provider Shri Naresh Jain. Further that there was no material on record to implicate assessee's involvement in the alleged manipulative activity. The Ld. AR also relied upon the decision of Co-ordinate Bench of this Tribunal in the case of Shri Dhirubhai Kantilal Sharma in ITA No.421/Ahd/2023 dated 06.02.2023. Submission of the Revenue on merits 9. Per contra, Shri Abhijit, Ld. Sr. DR submitted that the assessee did not bring on record any evidence for purchase of shares and contract note and the invoice/bill for purchase of shares were not filed in spite of specific request by the AO. He submitted that the assessee was a salaried person and not a regular investor in shares. The investment in shares of M/s. Nyssa Corporation Limited was made for the first tim....
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....lean and explained the mode of acquisition of the original shares. Contract notes/bills/vouchers for purchase of shares was not brought on record. The de-mat account of the assessee was opened on 21.04.2012. The assessee was a salaried person and had no prior experience of investment in shares. It has not been explained as to why the assessee had made the initial investment in shares of a non-decrepit company Ravinay Trading Company Limited or M/s. Nyssa Corporation Limited. According to the AO, acquisition of the shares was a predetermined move with sole aim to bring back his own unaccounted money. Considering the nature of investment made by the assessee, the suspicion of the Assessing Officer was not unfounded. 10.3 The assessee has submitted that the sale of shares were made through stock exchange on which STT was paid and the payment was received through banking channel. Where the issue of LTCG is involved, not only the sale of shares but the genuineness of the purchases also has to be examined. In the mechanism of capital gains computation what is relevant is not only the sale of shares but also the purchase of shares. Therefore, the genuineness of the entire transaction o....
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....nces brought on record the first question that arises is whether these evidences satisfy the test of preponderance of human probability. The assessee was new to share trading activity. If so, why he didn't trade in a blue-chip listed company rather than investing in shares of unknown decrepit company Ravinay Trading Company Limited. The department had conducted detailed enquiries in the organized racket of bogus LTCG transactions which were claimed exempt from tax. During the course of investigation, the transactions in BSE listed penny stocks, which were used for generating bogus LTCG, were verified. The AO has discussed the price movement of this share in the assessment order from which it is evident that there was continuous manipulation of the price of the share and the increase in share price of penny stock M/s Nyssa Corporation Ltd. was noncommensurate with its financial results. The enquiries and evidences conclusively proved that the trades were manipulated and the gains/losses made by beneficiaries in trade of this security can't be held as genuine. The movement of the share price was abrupt, unrealistic and not based upon any sound realistic parameter. The Supreme....
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....e to be applied and while doing so, one cannot lose sight of the fact that the shares of very little-known companies with in-significant business had a steep rise in the share prices within the period of little over a year. To reproduce from the said order: "69. Thus, the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all th....
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.... a passive beneficiary of the transactions. The Hon'ble Supreme Court held in the case of Rakhi Traders (P.) Ltd. (supra) that in trade transactions with huge price variations of the transactions, it will be too naive to hold that the transactions were through screen based trading and hence anonymous. According to the Apex Court, such conclusion would be overlooking the prior meeting of minds involving synchronization of buy and sale order and that such transactions were manipulative/deceptive device to create a desired loss and/or profit. 10.10 On consideration of the facts and the surrounding circumstances as discussed above, we are of the considered opinion that the transactions entered into by the assessee are not genuine. The manner of purchase of shares of M/s Nyssa Corporation Ltd being not explained, non-disclosure of the gain arising in trade of shares in the original return of income; the assessee has not discharged his onus against the adverse evidences brought on record by the AO and no satisfactory reply was given to explain the same. The unusual investment in shares of M/s Nyssa Corporation Ltd., the preponderance of probabilities and the surrounding circumstan....