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TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 190
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....s of appeal taken by the assessee are reproduced as under: "Grounds of Appeal: (Without prejudice to each other) 1. The Learned Assessing Officer has erred in issuing notice u/ s.148 of the Act, which is illegal and bad in law and hence the same should be quashed and the reassessment made on the basis of the same is required to be cancelled. 2. The Learned CIT(A) ought to have quashed the assessment order passed by the Assessing on the basis that the assessee had sold Penny Stock Kushal Ltd, and which resulted into capital gain of Rs. 1,59,11,628/- and has claimed exemption u/s. 10(38) of the I.T. Act, 1961 holding that the assessee has taken accommodation entry of long term capital gain to bring his unaccounted income in the books of account to avoid the legitimate payment of tax and only on the basis information received from Investigation Wing search and seizure carried out u/s. 132 of the Act in the case of Kushal Group, Ahmedabad on 05.02.2019 holding that the they are involved in price rigging and providing bogus accommodation entries in the form of LTCG, loss, STCG, loss etc. 3. The learned CIT(A) has erred in upholding the additi....
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....persons. Since it was also found that the assessee had also traded in the scrip of Kushal Ltd., therefore, the AO was of the view that the assessee had shown bogus LTCGs and STCG by trading in Kushal Ltd. scrip. He, accordingly, reopened the assessment of the assessee u/s. 147 of the Act r.w.s.148 of the Act and show-caused the assessee as to why the LTCG and STCG /sales proceeds from the sales of shares of "Kushal Ltd." be not added to the income of the assessee. In reply, the assessee submitted that he was not engaged in any bogus share trading as alleged. It was submitted that the assessee was a bonafide purchaser of the shares. That the shares were purchased by the assessee out of loan taken of Rs. 50,00,000/- during the Financial Year (FY) 2015-16 and that no unaccounted investment was made. That the decision to buy the shares of "Kushal Ltd." was taken by him on the basis of knowledge of market and market trends and information from investors. It was further submitted that the assessee had purchased 73000 shares of "Kushal Ltd." out of which the assessee was holding 66100 as on 17/03/2017 upon which bonus shares of 66100 were issued and further that the assessee had not dispo....
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....(which was 13.19% of the market volume) during the investigation period. * Ashish Panalal Shah has also accepted that he has used demat account of various persons to do synchronized share trading to rise the share price of the scrip Kushal Limited. He had also accepted that he is doing this market manipulation in various scrips and receives commission for such market manipulation. * All the trading in the above demat accounts were actually carried out by single person Ashish Panalal Shah which proves that the trading was synchronized share trading to rise the share price of the scrip Kushal Limited to provide undue benefit of bogus LTCG/LTCL/STCG/STCL to the beneficiaries to help them to evade taxes. * It is also pertinent to note here that SEBI has passed one more Adjudication Order No. EAD-7/BJD/NJMR/2019-20/3332-3345 dated 31.05.2019against another14 persons who indulged in trades that created a misleading appearance of trading and contributed to manipulation in the scrip price of Kushal Tradelink Limited and imposing penalty of Rs. 3,00,000/- on each person." 3.2. The AO, thereafter, discussed the evidence seized/impounded by the IW and concluded a....
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....." He has further submitted that had the assessee been indulged in bogus LTCG/STCG, the assessee would have sold the entire shareholding of "Kushal Ltd." He has submitted that the assessee was still holding 1380 shares of "Kushal Tradelink Ltd.". He has referred to page No.22 of the paper-book and submitted that the assessee had purchased the shares during the FYs 2015-16 and 2016-17 and had sold the shares from June-2017 to August-2018. He has referred to the share price fluctuation of the said scrip and submitted that the price of the shares were at peak at Rs. 302.73 as on 20/01/2017, however, the assessee had sold the shares when the price was falling. Had the assessee been aware that the price of the said scrip has been rigged, he would have sold the shares when the price was at the peak. He has referred to page No.17 of the paper-book to submit that when the assessee purchased the said shares the company was showing good profits. He has further referred to page No.21 of the paper-book to submit that as on 31/03/2018, there were more than 7 crores individuals over holding the shares of "Kushal Tradelink Ltd." He, therefore, has submitted that the assessee was a bonafide invest....
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....ny failure on the part of the assessee in not disclosing fully and truly all material facts necessary for assessment. 41. Moreover, from the reasons recorded it appears that the initiation of reopening proceedings are on the borrowed satisfaction as no independent opinion is formed and on bare perusal of the reasons recorded, it emerges that the Assessing Officer, considering the information received from the insight portal, has issued impugned notice forming reason to believe that the income has escaped the assessment on the presumption that the petitioner has been involved in creating the non-genuine profit which is already offered to tax in the return of income which is accepted in the regular course of assessment by passing the order under section 143(3) of the Act. 42. It is also pertinent to note that there is no basis to form reasonable belief for escapement of income except the information made available on the insight portal. The respondent-Assessing Officer has not considered the material on record to come to the conclusion that there is failure on the part of the petitioner to disclose truly and fully all material facts to have reason to believe for esc....
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.... of K in its return, reopening notice issued merely based on information of price rigging in shares from K was to be set aside." 6.2. Similar view has also been taken by the Hon'ble High Court of Gujarat in the case of Ashishbhai Jashwantbhai Desai HUF vs. ITO reported in [2025] 171 taxmann.com 220 (Gujarat) relating to the issue of reopening of the assessment on the ground that the assessee had earned LTCGs on sale of shares of Kushal Group and it has been categorically held that in the absence of any other information to the AO that the assessee was indulged in any type of price rigging or any live-link of the information available on portal with the assessee, the reopening of the assessment was bad in law. It was held that the AO has recorded the reasons only on the basis of the borrowed satisfaction without there being any live-link between the information available on the Portal and the assessee, the AO cannot be said to have formed an independent satisfaction regarding the reasons recorded to re-open the assessment to come to the conclusion that there is escapement of income. 6.3. In the case in in hand also, the assessment has been reopened firstly on the ground that t....