TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 146
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....isposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 03/Rjt/2024, for Assessment Year (AY) 2012-13, in the case of Mansukhlal Khimaji Khimasiya, have been taken into consideration for deciding the above appeals en masse. 3. Grievances raised by the assessee, in ITA No. 03/Rjt/2024 for Assessment Year (AY) 2012-13 ( lead case) which, being interconnected, will be taken up together, are as follows: "(i) The Ld. PCIT has grossly erred in law and on facts in assuming jurisdiction u/s. 263 of the Act on the erroneous ground that the impugned assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. (ii) The Ld. PCIT has grossly erred in not appreciating that in order to invoke section 263, two conditions must be fulfilled viz. the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue. In the present case, Ld. assessing officer has passed the reasoned assessment order after analyzing all details and therefore, there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. Under ....
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....and manipulated to provide bogus accommodation entries to the beneficiaries in the form of bogus long term capital gains (which is exempt u/s 10(38) of the Act or bogus long term /short term capital loss). The assessee has sold 3500 shares of Karma Ispat Ltd, for Rs. 9,71,587/-, on 10/06/2011 and 13/06/2011, which was held to be a Penny Stock and hence it was required to be added to the income of the assessee. These shares were purchased by the assessee nearly 13 months back on 29/04/2010 for Rs. 80,869/-, at a price of Rs. 23/- per share. The long term capital gain of Rs. 8,90,894/-, on this transaction was claimed exempt u/s 10(38) of the Act. 6. Accordingly, a show -cause notice for initiation of proceedings u/s 263 of Act, dated 19/10/2023, was issued to the assessee through ITBA, as well as sent through registered post, which is reproduced as under: "Please refer to the above. 2. On perusal of the case records for the AY 2012-13, it is observed that the assessment in your case has been finalized vide order u/s 147 of the I. T. Act dtd 07/05/21, by determining total income at Rs. 4,05,220/- accepting returned income. 3.1. On perusal of assessment r....
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....Khimashia AFNPS7414L 2012-13 14/05/21 7,74,541 Pravinchandra Khimji Khimashia (HUF) AADHS2922N 2012-13 07/05/21 9,34,490 Rekha Dhirajlal Khimasia assessing officer ZPS9724E 2012-13 09/09/21 7,99,530 The assessing officer has required to make an addition of Rs. 8,90,894/- on account of bogus LTCG, to your total for the following reasons as the additions were made in six cases after discussing the facts in the assessment orders. (i) The SEBI as well as investigation wing Kolkata and Mumbai has already confirmed that the transactions of sale of shares of Karma Ispat were same in nature. (ii) Assessee had purchased shares of Karma Inspat Ltd through broker Vijay Bhagvandas & Co. in physical form. (iii) Assessee had purchased shares of Karma Inspat Ltd on 29.04.2010, when the share price was mere 23 per unit. The same sharply rose to about Rs. 275/- per share on 02/07/11, at the time of sale of the share. This is 1195% increase in the shares price in short span of about 14 months. (iv) The shares were sold within 14 months i.e. in June 2011, just after the assessee became eligible for exemption u/s.10....
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....Contract Note for Purchase of shares, Broker Ledger (with broker details) from whom shares were purchased and Contract Note for Sale of shares etc. were filed before the assessing officer. 8. However, ld.PCIT rejected the above contention of the assessee and noted that the common pattern in penny stock transactions in assessee case are as follows : (1). Purchase of stock at rock bottom price generally in physical form. (2). No Financial credibility of the company, whose shares are purchased by the investor. (3). Bell Pattern in share price movement i.e. once price target is achieved price falls back to minimum. (4). No rhyme or reason for sudden spurt of share price, defying Index or similar share price movements. (5). Promoters of shares are also not from any established groups, in fact they are of people of no means. (6). Price escalation through synchronized trading within limited parties, mostly entities controlled by the entry operators. (7). Statement recorded during search or survey operations conducted by the investigation wing clearly established the facts that price of the shares are manipulated with the so....
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....thout inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." The ld.PCIT noticed that as per the above Explanation (2) of section 263 of the Act, the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if the order is passed without making inquiries or verification of the information available on record. In view of the above facts and on perusal of reasons recorded for reopening visa- vis the order passed by the assessing officer u/s 147 of the Act dated 07/05/2021, it clearly appears that the assessing officer has altogether not considered the issue under discussion and has not made any enquiries as regards the issues raised in the Investigation report. Therefore, in the facts and circumstances of the case, it clearly appears that the assessing officer has failed to make en....
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.... 15. On the other hand, learned DR for the revenue submitted that there is no enquiry conducted by the assessing officer during the assessment proceedings, so far, the issue raised by the learned PCIT in his order, is concerned. The Learned DR took us through, the assessment order and the findings of the assessing officer and stated that assessment order is very cryptic and nonspeaking order, there is no any discussion in the assessment order about the issue raised by the learned PCIT, therefore, it is a case of complete non-enquiry on the part of the assessing officer and not only that it is non-application of mind on the part of the assessing officer, these all facts are proved by the findings of the assessing officer, vide order dated 07.05.2021, which are reproduced below: "Notice u/s 148 was issued in this case on 28.03.2019 after recording reason and obtaining necessary approval. The assessee has made sale transaction of shares of Karma Ispat Ltd. Trade quantity 3600 Share for Rs. 9,77,265/-. The return in this case was filed on 19.04.2019 declaring an income of Rs. 4,05,220/- Notice u/s 143(2) dated 21.05.2019 was issued to the assessee and served electro....
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.... year after the alleged purchase by way of an off-market deal. The shares were subsequently transferred to the assessee's d-mat account immediately prior to their sale through stock exchange. All these facts clearly indicate that the transaction was not genuine. They could do back-dating of most of the transactions but could not manage the banking transactions and demat of the shares. At this juncture, it is critical to consider that the assessee has not provided any evidence substantiating the source of the credit balance accrued into broker's account which was subsequently used to acquire the shares. The outlined scenario raises significant doubts regarding the authenticity of the transaction executed by the assessee. It is highly irregular and raises suspicion regarding the genuineness on purchase the shares. It appears that the assessee has claimed bogus Long-Term Capital Gains, and the purchase narrative is merely an afterthought intended to legitimize the transaction for which all the paper work was done by the assessee in collusion with the broker. iii. The PCIT relied upon the judgement of ITAT Pune in the case of Rajkumar B Aggarwal [ITA Nos. 1648/1649/Pun....
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....ssee is wrongly placing reliance in his submission and contending that the assessing officer has made enquiry in the matter. For e.g. Financial Statements of the company were not examined: - As per the financial statement of Aricent Infra Limited for the year ended 31^st March, 2013: the Earning Per Share (EPS) was Rs. 0.30 only and the Price Earnings Ratio(P/E) at the price of Rs. 153 at which assessee sold her shares was an astronomical and unimaginable figure of 510 which is unthinkable for any genuine company in the Indian stock market; there were fixed assets of Rs. 12,617 only; negligible employee cost of Rs. 2.23 lakh suggest that there are hardly any skilled manpower in the company. All these facts clearly shows that the prices of the shares were artificially raised by 76 times in a year with a PE ratio of 510 to provide accommodation entry to assessee and others. assessing officer should have asked the assessee to produce an example of any one case of a genuine company having genuine business and having PE greater than 500 or any one case of a genuine company having genuine business and whose prices have increased by 76 times in a year, a most relevant enquiry which assess....
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....purchased shares of Aricent Infra Ltd. through an off-market transaction. In this case following suspicious facts - that the shares were purchased by way of an off-market deal, shares were not transferred in demat account of the assessee till their sale, no payment was made through banking channel, indicate that the transaction was prima-facie not genuine and only paper-work done to give colour of genuineness to the transaction. 2. Tejalben Samirbhai Shah v PCIT [ITA no. 78/AHD/2021] * Here, assessee had made an application for the allotment of the shares in an issue being lodged by the company. * Shares purchased in D-mat mode * According to the office note of the AO, Assessee has not engaged in any offline share purchased transaction, nor does the documentary evidence reflect any purchase In cash. * Assessee purchased shares from the broker through an off market transaction * There is no office note or any other document available to establish that Assessee has not engaged in any offline share purchased transaction, nor does the documentary evidence reflect any purchase in cash. 3. Parashuram Pottery Works Co. Ltd. V ITO [1977] 106 ITR 1 (SC) * The c....
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.... learned PCIT. In appeal effect order passed by the assessing officer under section 143(3) read with section 263 of the Act, the assessing officer made the addition in the hands of these four assessees` as these assessees` failed to prove their claim with documentary evidences. We also find that facts and grounds of appeals of these assessees are same and identical. 18. We note that there is a discrimination on the part of the assessing officer that as per the information from ITO (CIB)-1, Mumbai, it is noticed that out of nine assessees, ( where same scrip/share in involved) who had taken bogus long term capital gains from penny stock, Karma Ispat, addition was made in six cases, however, no addition was made in three cases, out of which one case pertains to assessee, under consideration, that is, Mansukhlal Khimji Khimashiya (HUF) for assessment year (AY) 2012-13. Considering these facts and discrimination on the part of the assessing officer, ld DR for the revenue, has rightly pointed out that assessing officer, cannot take a plausible view which can be sustainable in the eye of law, as the orders passed by the assessing officer in these four cases, are based on arbitrariness....
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....g channel in these four assessee's cases. Similarly, in these four cases many such enquiries were never made by the assessing officer, like why the shares were not transferred in demat account even after one year of the purchase, what was the source of funding of the purchase of shares and whether any third party evidence exists to prove the genuineness of purchase transaction, etc. Therefore, based on these facts, we note that assessment orders passed by the assessing officer in these four assessee's case, are erroneous as well as prejudicial to the interest of the revenue, therefore, learned PCIT has rightly exercised his jurisdiction under section 263 of the Act. 21. We also find merit in the submissions of learned DR for the revenue that aforementioned shares remained under the custody of the broker until April, 2012, that is, for almost a year after the alleged purchase by way of an offmarket deal. The shares were subsequently transferred to the assessee's demat account immediately prior to their sale through stock exchange. All these facts clearly indicate that the transaction was not genuine. They could do back-dating of most of the transactions but could not manage t....
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....e of purchase and sale of shares of Karma Ispat Limited and also not verified dematerialization of the share purchased by the assessee. The Debit and credit of shares in the Demat account of the assessee with reference to date of purchase and sale made, were also not examined by the assessing officer. Therefore, we note that the order u/s. 263 of the I.T. Act, 1961 is valid even if one of the several items dealt with therein is found prejudicial to the interest of revenue and for this proposition of law, we place reliance on the decision of Hon'ble Madras High Court in the case of Indian Textiles Vs. CIT, 157 ITR 112 (Madras)". Further, it is also important to mention here that the provisions of section 263 can be invoked even where full facts are disclosed but the assessing officer has not examined these details as per correct provisions of law. In support of this proposition, we place reliance on the decision of the Hon'ble Rajasthan High Court delivered in the case of CIT Vs. Emery Stone Manufacturing Company, 213 ITR 843 (Rajasthan). Further, the provisions of section 263 can be invoked even where the issue is debatable. For this proposition, we place reliance on the de....