TaxTMI 
TaxTMI 
2026 (5) TMI 228
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....rder dated 24th December, 2019 passed by the Jurisdictional Assessing Officer which was within a period of four weeks from the date of order passed by him on 29th November, 2019 disposing of the Appellant's objections to the reopening of assessment as a result of which the law laid down by the Hon'ble Bombay High Court in the case of Asian Paints Ltd v. DCIT (296 ITR 90 Bombay) has been clearly violated. 2. The Ld. CIT (A) erred in law and on facts in upholding the reopening of assessment made by the Assessing Officer for Assessment Year 2012-13 under section 148 of the I.T. Act without appreciating the fact that the reopening was merely made on the basis of information received by the Assessing Officer from the Investigation Wing which was furnished to the Appellant without his own reason to believe that the Appellant's income for the relevant Assessment Year has escaped assessment. 3. The Ld. CIT (A) erred in law and on facts in upholding the reopening of assessment for the relevant Assessment Year 2012-13 without satisfying himself whether the conditions precedent for reopening of assessment have been satisfied or not including the following: ....
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.... CIT (A) erred in law and on facts in not considering the Submissions and evidences filed by the Appellant before him and also before the Assessing Officer and ignoring the said Submissions and evidences in toto. 8. The Ld. CIT (A) erred in law and on facts in upholding the levy of interest under section 234A, 234B, 234C and 234D of the I.T. Act" Additional Ground of appeal filed on 15/04/2016 "The Learned Commissioner of Income tax (Appeals) NFAC, Delhi (hereinafter referred to as "the Ld. CIT (A)") erred in law and on facts in upholding the assessment order dated 24th December, 2019 passed by the Jurisdictional Assessing Officer which was within a period of four weeks from the date of order passed by him on 29th November, 2019 disposing of the Appellant's objections to the reopening of assessment as a result of which the law laid down by the Hon'ble Bombay High Court in the case of Asian Paints Ltd. v. DCIT (296 ITR 90 Bombay) has been clearly violated" 3. The relevant facts in brief are that the Assessee is a Hindu Undivided Family. For the Assessment Year 2012-2013, Assessee filed its return of income on 08/09/2012 which was revised on 17/09/20....
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....en up for hearing the Learned Authorized Representative for the Assessee advanced submissions on admission of additional ground raised by the Assessee vide Letter, dated 15/04/2026 challenging the validity of reassessment proceedings. The Learned Departmental Representative opposed the admission of additional ground. On perusal of the ground raised by the Assessee, we are of the view that the Assessee had taken legal ground which can be adjudicated without inquiring into fresh facts and on the basis of material on record. We further we note that even before the Learned CIT(A), the Assessee has challenged the validity of reassessment proceedings. Therefore, the ground raised by the Assessee is in the nature of additional legal plea. Accordingly, we admit the additional ground raised by the Assessee and proceeded to adjudicate the same as it travels to the root of the matter. 7. The contention of the Assessee is that the reasons recorded by the Assessee for initiation of the reassessment proceedings under Section 147 of the Act are bad in law. It was submitted by the Learned Authorized Representative for the Assessee that the Assessee was engaged in the business of regular trading....
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.... the thoughtful considerations to the rival considerations and have perused the material on record. 10. We note that the notice under Section 148 of the Act was issued on 26/03/2019 requiring the Assessee to file return of income. The Assessee did not file return of income in response to the notice under Section 148 of the Act. In the case of GKN Driveshaft (India) Ltd. v. ITO [2002] 125 Taxman 963/[2003] 259 ITR 19 it was held by the Hon'ble Supreme Court that when a notice under Section 148 of the Act is issued, the proper course of action for the assessee is to file return and to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the present case the Assessee did not file return of income and was therefore, not entitled to the benefit of the aforesaid judgment of the Hon'ble Supreme Court. The Assessee filed a revised return of 08/11/2019 much after the time of 30 days to file return of income granted in the notice issued under Section 148 ha....
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....and this scrip has been used by beneficiaries (sellers of shares) to launder money in the garb of Long Term Capital Gains (LTCG) while claiming exemption under section 10(38) of the I.T. Act. The DDIT (Inv.) Unit-8(3), Mumbai has further informed that during F.Y. 2011-12 the assessee has traded in this scrip for trade value of Rs. 43,33,294/-. The DDIT (Inv.) Unit-5(2), Mumbai has also sent an information in this case vide letter dated 06.03.2019. As per the information, M/s. Gemstone Investment Limited (GIL) is a penny stock scrip listed on BSE with scrip code (531137) and this scrip has been used by beneficiaries (sellers of shares) to launder money in the garb of Long Term Capital Gains (LTCG) while claiming exemption under section 10(38) of the I.T. Act. The DDIT (Inv.) Unit-5(2), Mumbai has further informed that during F.Y. 2011-12, the assessee has traded in this scrip for trade value of Rs. 3,13,498/-. Further, the DDIT (Inv.) Unit-6(2), Mumbai has sent an information in this case vide letter dated 13.02.2019. As per the information, M/s. VAS Infrastructure Ltd. (PAN: AAACV3537A) is a penny stock scrip listed on BSE and this scrip has been used by beneficia....
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....specific information received from the Investigation Wing to the effect that the Assessee undertaken transactions in penny stock scripts. In the objections filed by the Assessee, it was not disputed that the Assessee had undertaken the aforesaid transaction. The objection of the Assessee was that the Assessee had not claimed Long Term Capital Gains exemption under Section 10(38) of the Act. As rightly pointed out by the Learned Departmental Representative the Assessee did not provide any details/documents along with Objections dated 23/11/2019 and since the regular scrutiny assessment had not taken place the material to carry out verification of facts was not available with the Assessing Officer. Since no assessment was framed on the Assessee, the Assessing Officer rightly invoked the deeming provision contained in Clause (b) of Explanation 2 to Section 147 of the Act to conclude that income liable to tax had escaped assessment. During the course of hearing the Learned Authorised Representative for the Assessee had placed reliance upon the judgment of the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd Vs. R.B. Wadkar: 268 ITR 332 and had referred to paragraph 20 which....
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.... 143(1) of the Act and no regular scrutiny assessment was framed on the Assessee. Therefore, Proviso to Section 147 was not applicable and the Assessing Officer was not required to allege that income had escaped assessment on account of failure on the part of the Assessee to disclose fully and truly all material facts necessary for framing assessment. Further, since no assessment had taken place, as per the deeming fiction contained in Clause (b) of Explanation to Section 2 to Section 147 of the Act was attracted, the case before the Assessing Officer was deemed to be a case where income chargeable to tax has escaped assessment. Therefore, the Assessing Officer was justified the reopening the Assessment on the basis of information received from the Investigation Wing by invoking Clause (b) of Explanation to Section 2 to Section 147 of the Act. As held by the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd (supra), the reasons recorded should be read as a whole and the same should disclose the mind of the Assessing Officer. In our view, the reasons recorded in the present case meet the aforesaid requirements. The Assessing Officer has also disclosed the link between in ....
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....hares and securities, that during the year it has traded in as many as 1,257 scrips, that it has not claimed any exempt Long-Term Capital Gain under section 10(38), and that the impugned transactions were offered under the head "Profits and Gains of Business or Profession". Contract notes, demat statements and bank statements evidencing purchase and sale of the shares through stock exchange have been relied upon to assert the genuineness of the credits. However, it is well-settled that in cases involving alleged accommodation entries through penny-stock scrips, mere production of contract notes, demat statements and banking channels is not conclusive, particularly when there is strong adverse material from the Investigation Wing indicating price-rigging and layering of unaccounted money." The Assessee has placed on record the summary of script-wise details of the transactions under consideration and the same is set our hereinbelow: PURCHASE SALE PROFIT/LOSS SR. NO. SCRIP CODE SCRIP NAME QTY AMOUNT QTY AMOUNT SHORT TERM LONG TERM SHORT SELL SPECULATION 1 517534 Nivya....
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....and offered to tax income as business income. Verification of record shows that no Long Term Capital Gains exemption under Section 10(38) of the Act has been claimed by the Assessee. Therefore, we are of the view that the Assessee had discharged the initial burden cast upon the Assessee under Section 68 of the Act. In our view, the belief formed by the Assessing Officer to the effect that the Assessee had incorrectly claimed benefit of Section 10(38) of the Act though sufficient for initiation of the re-assessment proceedings under Section 147 of the Act, was not sufficient to make addition in the hands of the Assessee since the Assessee had placed on record material to establish that no such capital gains exemption was claimed. Thus, the onus shifted back upon the Revenue. It was up to the Assessing Officer to bring on record material to support the case of Revenue. Since, the Assessing Officer failed to do so, we hold that the addition made by the Assessing Officer bringing to tax entire sale consideration arising from sale of shares under consideration INR.6,08,67,243/- invoking the provisions of Section 68 of the Act cannot be sustained. Further, we note that the Assessing Offi....