TaxTMI 
TaxTMI 
2025 (12) TMI 1574
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.... for both the assessment years i.e. A.Ys. 2018-19 & 2019-20. 4. First, we would take up the appeal filed by the Revenue in ITA No.151/RPR/2025 for A.Y.2018-19 for adjudication wherein grounds of appeal raised by the Revenue are as follows: "1. Whether on facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs. 2,04,23,038/- which was added by the A.O? 2. Whether on facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs. 2,04,23,038/- by ignoring the findings/facts of the Investigating Wing as brought on record by the A.O. 3. The order of the Ld. CIT(A) is erroneous both in law and on facts. 4. Any other ground which may be adduced at the time of hearing." 5. The Revenue has challenged the deletion of addition of Rs. 2,04,23,038/- by the Ld. CIT(Appeals)/NFAC and hence, they are before us questioning the validity of such deletion of addition on merits. 6. The brief facts emanating in the assessment year 2018-19 are that the Income Tax Department had received information on financial transactions/activities relating to the assessee under "Risk ....
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.... 'Oasis' but the AO decided to proceed with the issuance of notice u/s 148. There is no specific mention in the assessment order whether any Rol was filed in response to notice u/s 148 and if yes, what was the income disclosed in such Rol. In the concluding paragraphs where computation is given, there is reference to RoI filed in response to notice u/s 148. Drawing the inference from such description and going by the written submission of the appellant; it is inferred that the appellant filed the Rol in response to notice u/s 148 on 23.04.2022 disclosing same total income as it was disclosed in the original Rol i.e. Rs. 28,26,160/-. 5.4. During the subsequent proceedings, notice u/s 143(2), 142(1) etc. were issued and there is no dispute on any procedural aspect of them. The re-assessment proceedings culminated in passage of an order u/s 147 r.w.s. 144B on 27.03.2023. The same is impugned here and hence this appeal order. 5.5. The grounds no. 1, 2 and 3 of the appeal are with respect to the addition of Rs. 2,04,23,038/- which is the crux of the dispute also; are taken up together as under: "1. The Assessing Officer erred in making addition of Rs. ....
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....n intention to be beneficiary to claim the Long term or short term capital gain/loss. Further the assessee has objected to the LTCG of Rs. 2,04,23,038/- saying it is the gross sale consideration and in respect of share transaction, it is only the profit or loss which is required to be considered for purpose of taxation and the same has been already considered /offered by the assessee in the assessee in its return of income. This contention of the assessee is also not acceptable. The main focus here in this case is the reasons on which the case of the assessee was reopenined ie. He has been found trading in the scrip of Oasis Tradelink during the assessment year under consideration hence not only the profit or loss element is in question, but the whole trade is in question. The assessee has admitted that he had earned amount of Rs 2,04,23,038/- on account of sale proceeds in this trade with Oasis Tradelink. Here the basic information is that the assessee has traded in the scrip of Oasis Tradelink and which is found to be true. To sum up, the assessee's submission in respect of transactions with Oasis Tradelink is not considerable due to above reasons." 5.5.2. In respons....
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.... Securities Ltd.) showing the entries of transaction ii Statement of profit and loss of all the transactions in shares, provided by the broker iii Bank statement of the appellant iv Bank Account from books with detailed narration 5.5.3. The appellant has also furnished separate tabulations of 'Short Term Capital Gain/Loss transactions' during the year as well as 'intraday trading transactions' during the year. The tabulation of 'Short Term Capital Gain/Loss transactions' during the year shows that the appellant has earned STCG of Rs. 6,02,532.59 and has incurred Short Capital Loss of Rs. 5,56,736.52 on trading of scrips of 'Oasis' during the year. The appellant has statedly bonafide set off STCL against the STCG of the year and net balance of STCG of Rs. 45,796.07 which was disclosed. Similarly, the summary of 'intraday trading transactions' during the year shows that the appellant made the intraday profit of Rs. 46,804/- from sale and purchase of scrips of 'Oasis'. The appellant has admitted that "the same was inadvertently, shown as short-term capital gain in income tax return of the assessee whic....
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....g was resorted to simultaneously as in the case of assessee, on the basis of similar allegation and a draft assessment order was issued proposing similar variation. On rendering of similar explanation, the assessment order has been passed on 23.02.2023 in the case of Shri Aneesh Saggar and 09.03.2023 in the case of Shri Munish Saggar and no addition/ variation has been made to the total income of the said assessee by the faceless unit. Copy of assessment orders and show cause notice were furnished before the Ld. AO vide reply dated 14.03.2022 which is enclosed as at Page No. 65- 75 and 76-07." 5.5.7. The appellant has stated that the evidences submitted by him have remained undisputed and uncontroverted and that nothing has been brought on the record by the AO to dispute any of such document/evidences and submissions by way of separate enquiry. 5.5.8. The appellant has also stated that "The appellant vide para no. 04 of letter dated 14.03.2023 (refer Page No. 14-15) and vide para no. 04(i) of letter dated 02.11.2022 (refer Page No. 3) filed before AO, had requested the AO that if anything adverse about the appellant was stated by said Shri Naresh Jain, a copy of a....
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....his support i.e. Durga Prashad Goyal vs. ITO [2006] 98 ITD 227 (ASK.) (SB), Adani Infrastructure & Developers Pvt. Ltd. vs. ACIT (2019) 101 taxmann.com 256 (Gujarat)", ACIT vs. Dharia Construction Company (2010) 328 ITR 515 (SC) and Sesa Sterlite Ltd. vs. ACIT (2019) 417 ITR 334 (Born. HC). 5.5.12. The appellant has assailed the assessment order on technicalities of non-adherence to provisions of section 151A which governs the scheme of faceless assessment in case of income escapements. The appellant pleads that by the virtue of CBDT's notification dated 29.03.2022, the notice u/s 148A/148 should have been issued by automated allocation in faceless manner which was not the case with him. 5.5.13. Besides the above, it is observed that in this case also, the Assessing Officer has applied the concept of Human probabilities and held the above said scrips to be a penny stock without bringing on record how the appellant is involved in any of the scrupulous activities or directly linked to one of the persons who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon'ble Bombay High Court in the case of Ziauddi....
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....resent case, the Hon'ble Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: - "8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus, the Court should consider the aspect of human probabilities that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination Of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his ....
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....f human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) conflicted with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, followed the same reasoning, and relied upon the report of the Investigation Wing. Lastly, the reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as inter alia, lack of evidence produced by the Appellant therein to show the actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Appellant, holding that the genuineness of the share transaction was not established by him. However, this is quite ....
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....n is that the scrips of "Oasis Tradelink Ltd." is rigged by entry provider i.e. Mr. Naresh Jain and his associates and therefore, on suspicion only, it has been held by the A.O that the assessee is a beneficiary. However, nowhere in the assessment order, the A.O had brought out any nexus of the assessee with the said Mr. Naresh Jain nor had brought any evidence of nexus that the assessee knowingly took benefit of such rigged shares of "Oasis Tradelink Ltd.". 8.1 Further, the Ld. Counsel for the assessee submitted that the entire transaction was carried out through recognized stock exchange i.e. Bombay Stock Exchange (BSE) and the assessee is in regular habit of purchase and sale of shares and this is not a case of isolated transaction and if at all, there is any rigging of shares of "Oasis Tradelink Ltd.", the assessee is merely an unsuspecting investor. Hence, additions in the hands of the assessee is misplaced, arbitrary, bad in law liable to be quashed. 8.2 It is further contended by the Ld. Counsel for the assessee that the department have received information relating to the assessee under the "Risk Management System" for the relevant A.Y. 2018-19, but what are those inf....
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....arefully considered all the documents/materials on record, heard the parties herein and have analyzed the facts and circumstances in this case. That on perusal of the assessment order, it is crystal clear that the A.O has not established any case of any direct nexus of an illegal benefit that has been derived by the assessee knowingly while trading in the scrips of "Oasis Tradelink Ltd." through the entry provider viz. Shri Naresh Jain and his associates. The assessee had submitted all the details and evidence regarding the entire transaction pertaining to "Oasis Tradelink Ltd." explaining total sale proceeds on the sale of shares of Rs. 2,03,94,191.10 and that such sale consideration has been duly reported/disclosed in the assessee's return of income. These facts remains undisputed by the department. That the sole reason, for which, the A.O had made addition in the hands of the assessee is that the scrips of "Oasis Tradelink Ltd." in which the assessee has transacted had been rigged by entry provider viz. Shri Naresh Jain and his associates. However, the Revenue has not brought on record any material/evidence linking the assessee to any dubious transaction related to such entry pr....
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.... of illegal benefit being derived by the assessee, in such circumstances, the assessee can only be termed as unsuspecting investor who had entered into investment by way of regular practice and it is not an isolated transaction. Therefore, case laws relied upon by the Ld. Sr. DR being substantially different on facts will not be able to come to the assistance of the Revenue. 12. That as discernable from the order of the department that they have received information relating to the assessee under the "Risk Management System" but what are those informations which the department has received from the "Risk Management System" was never shared with the assessee for his response. That further, there was search and survey action conducted on Shri Naresh Jain and his associates by DDIT (Inv.), Mumbai which in fact reveals that the said Shri Naresh Jain had rigged various shares and provided accommodation entries to various beneficiaries. However, this report/information of the DDIT (Inv.), Mumbai was also not shared with the assessee and no opportunity was provided to the assessee to cross examine or furnish reply regarding the same. Nothing has been brought on record by the Ld. Sr. DR....
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....any action against a party, they must be given an opportunity to be heard and present their case. 16. The right to be heard is the cornerstone of natural justice and in this regard in the case before the Hon'ble Uttarakhand High Court in 2022 regarding a practising advocate, Dushyant Mainali (CLR No.22/2022) wherein the Hon'ble High Court had observed that the said advocate Mainali was accused of professional misconduct for allegedly misleading the litigant and causing the delay in filing revisional petition. The Hon'ble High Court directed the Bar Counsel of Uttarakhand to initiate disciplinary proceedings against the lawyer. Mainali challenged these remarks before the Hon'ble Supreme Court, contending that he was neither a party to the case before the High Court nor was involved in any capacity. The remarks, therefore, not only tarnished his professional reputation but were also made in clear violation of the principles of natural justice. The Hon'ble Apex Court in Civil Appeal No.15191/2022, arising out of a Special Leave Petition filed by Dushyant Mainali examined the Hon'ble High Court's order and found the approach to be legally untenable. Hon'ble Justice Gavai (as he was ....
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....d been done in the present case of the assessee. 20. We find that in the similar facts and circumstances, the Hon'ble High Court of Rajasthan Jodhpur Bench in D.B. Civil Writ Petition No. 17651/2022 connected with D.B. Civil Writ Petition No. 17523/2022 dated 21/03/2024 observed and held as follows: "14. In view of above, it is clear that the entire basis for reopening the assessment is nothing but the material and information collected during search conducted in the premises of another assessee. Collection of details relating to search would not mean collection of new incriminating material and information, independent of the incriminating material and information collected during search proceedings. 15. Learned counsel for the petitioner is correct in submitting that in fact, search was carried out in the year 2016 and the respondents had the authority to reopen the assessment by invoking the powers under Section 153C of the Act of 1961 and draw reassessment proceedings under Section 153A of the Act of 1961. That was not done within the period of limitation prescribed under Section 153B of the Act of 1961. The respondent-authority was fully aware of the f....
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....there was no search in the premises of the assessee and that the search and survey had taken place in the premises of Mr. Naresh Jain & his associates, wherein, incriminating material in relation to the assessee were found which formed the basis of the department to proceed against the assessee u/s. 147 r.w.s 144B of the Act. It was found out that Mr. Naresh Jain and his associates were involved in rigging of shares in connivance with share brokers, entry providers, money launders for providing illegal benefits to the beneficiaries and one such shares was that of "Oasis Tradelink Ltd". So these were the results of a search conducted in the third party premises, not in the premises of the assessee. Therefore, in such cases as per the judicial dictate enshrined in the aforesaid pronouncements mandates the appropriate legal provision to get triggered is Section 153C and not Sections 147/148 of the Act. Therefore, the assessment framed u/s. 147 r.w.s. 144B of the Act is held to be void ab initio and the same is, thus, quashed. 23. That since the assessment order itself is quashed, any other subsequent proceedings becomes non-est as per law. 24. That the appeal filed by the Revenu....