TaxTMI 
TaxTMI 
2026 (6) TMI 595
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....ances of the case and in law, the Ld. CIT(A) is justified in not upholding the reopening of assessment proceedings u/s 148 of the Income Tax act, 1961 (the Act), holding that re-open proceedings are not found to be correct, without considering Explanation 2 to section 147 & provisions of section 149(1)(b) of the Act? 2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in quashing the proceedings u/s 147 of the Act without considering the fact that the reopening is based on proper recording of reasons? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in quashing the reopening of Assessment u/s 147 of the Income Tax Act, 1961, without considering the fact that merely showing the facts in return of income is not enough to get rid of the obligation on assessee to make full and true disclosure? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in quashing the proceedings u/s 147 of the Act thereby deleting the addition made by the Assessing Office being bogus LTCG which could not be proved to be genuine by the assessee? ....
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.... deleting the addition in respect of alleged commission/expenditure by invoking the provision of Section 69C of the Income tax Act on the alleged non genuine sale value of shares without any cogent material on record?" 3. The assessee an individual earning income from House Property and Other Sources, filed the original return of income on 27.02.2013 declaring total income at Rs. 6,58,791/-. The return was processed u/s 143(1) of the Act. Subsequently, notice u/s 148 dated 28th March 2018 was issued, in response to which, the assessee filed her return declaring the same total income of Rs. 6,58,790/-. Information was received by the AO in respect of certain Penny stock companies from the Investigation wing of the Department. During the course of investigation in one of such cases of Gemstone investment Limited (GIL), it was found that large scale manipulations had been done in the market price of shares of GIL by a group of persons acting as a syndicate in order to provide entries of tax exempt long term capital gains/ profit to various beneficiaries. According to the information received, the assessee had traded in the above scrip to the tune of Rs. 11,39,000/-during the financ....
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....ly and truly all material facts relevant for the purposes of the assessment. He placed reliance on several other case laws involving reopening after four years from the end of the relevant assessment year i.e. Priyanka Carbon & Chemical Industries (P) Ltd. vs. DCIT (2008) 15 DTR (Guj.),ACIT vs. Jagdishbhai Nanubhai Tekrawala (2008) 12 DTR (Guj) 270, 5.5 In Vareli Weavers Pvt. Ltd. vs. DCIT (1999) 240 ITR 77 (Guj),CIT Vs. DCM Ltd.,(2009) 24 DTR(Del.) wherein the Hon'ble High Courts found that there was no allegation in the reasons recorded by the AO that the assessee had failed to file its return or to disclose fully and truly all material facts in its return of income nor even there was any allegation regarding escapement of income. He also relied on CIT & Another Vs. Foramer France, 264 ITR 566 (SC), wherein hon'ble Apex Court upheld the order of the Hon'ble Delhi High Court in concluding that when there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment, the proviso to the new section 147 of the Act squarely applied, and the impugned notices were barred by limitation mention....
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....haveri Stock Brokers Pvt. Ltd(supra) held that proceedings initiated u/s. 147 of the Act were valid. As intimation u/s. 143(1)(a) is not "assessment", there is no question of treating reassessment in such a case as based on change of opinion. Since no decision had been taken at the first instance, there is no question of reviewing it based on change of opinion. The AO was required to record reasons for reopening of the concluded assessment which were duly recorded by him. The AO was having cogent material to come to belief that the income of the assessee has escaped assessment. 6.2 In this case, processing of return of income was only done. If we refer to section 143(1) of the Act as it was existing in the statute at that point of time, it is clear that the scope of section 143(1) was very restrictive and limited to correcting any arithmetical errors or to an incorrect claim apparent from any information in the return of income filed by assessee. Thus, the AO could not go into merits of the claim made by assessee and such corrections were limited to correcting any arithmetical errors and to correcting incorrect claims apparent from any information in the return. It is an admitte....
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....purchases shown to have been made off market, statement of various relevant persons admitting that these companies were indulged in giving accommodation entries, abnormal rise in prices over short period, cash trails in the accounts of entry operators etc.? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) ignored the ratio laid down by the Hon'ble Calcutta High Court in the case of PCIT VS Swati Bajaj reported [2022] 139 taxmann.com 352 (Calcutta) and the decision of Hon'ble Delhi High Court in Suman Poddar Vs ITO, whereby the entire modus operandi adopted by the assessee has been clearly illustrated and there is no reason to hold a contrary view and that the principles of natural justice do not require formal cross examination, since it has direct relevance to the assessee's case? 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition, granting relief without considering the Principals laid down in the decisions of Hon'ble Supreme Court in the cases of Durga Prasad More vs. CIT (1971) 82 ITR 540 (SC) and Sumati Dayal Vs. CIT (1995) 80 Taxman 89 (SC) that apparen....
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....e AO observed that the Kolkata Investigation Directorate had undertaken investigation into 84 penny stocks including Rs M/s. Radford Global (Formerly known as Rosetter Resorts and than name changed to P.S. Global) and Shares of MKEL(formerly known as Kaushalya Global) and had given detailed findings indicating bogus LTCG/STCL entries claimed by large number of beneficiaries. The modus operandi involving operators, intermediaries and the beneficiaries has been detailed in the investigation report prepared and disseminated by the Kolkata Directorate. Similar investigations were also conducted by the Directorate of Investigation at Mumbai and Ahmedabad. The basic aim of this dubious scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gain. This entry of LTCG was taken by selling the shares on the stock exchange and registering the proceeds arising out of the sale of shares into the books as LTCG. For implementing this scheme, shares of some Penny Stock Companies were used. The same modus is adopted for providing accommodation entry of bogus loss. 11.1 After discussing the facts of the case and the Investigation r....
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....ey, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the claim of LTCG of Rs. 2,59,63,603/- as exempt u/s 10(38) of the Act was denied and the amount of Rs. 2,66,19,020/- received back as sales proceeds on sale of shares was added in the total income of the assessee as unexplained cash credit u/s. 68 of the Act. He also made addition u/s 69C of the Act treating commission payable on such transaction. 12. In the subsequent appeal, the contested the action of AO by claiming that all relevant details in support of the genuineness of the impugned transaction were furnished before the AO who did not take in account in deciding the issue and mainly relied on a generalised report of the Investigation Wing. The ld.CIT(A) after taking into consideration the necessary evidences as discussed at length in the appellate order and also by relying upon certain co-ordinate Bench decisions of ITAT deleted the addition. He placed reliance on ITAT Mumbai in the case of Yogesh P. Thakkar Vs DCIT vide in ITA No.1605/Mum/2021 dated 03.02.2023 for AY 2014-15 deleted the additions made in respect of bogus ....
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....ts were received by the assessee by account payee cheques from the stock exchange through the registered broker. Amounts received on sale of shares were duly subjected to levy of Securities Transaction Tax (STT) at the applicable rates. 5.2. We find that no enquiries were carried out by the revenue either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The revenue had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report 5.3. We find that the revenue had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators. 5.4. It is not in dispute that the assessee had made purchase of shares in off-market either through preferential allotment of ....
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....ly or indirectly in any manner whatsoever, till the final investigation by SEBI is completed. After completion of the final investigation, SEBI had passed a final order dated 20/09/2017 in the case of Radford Global Ltd clearly acquitting 82 persons which admittedly included the assessee and the company Radford Global Ltd on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices. The relevant operative portion of the SEBI order dated 20/09/2017 is reproduced hereunder:- 10. Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 are liable to be revoked. ....
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....d to establish the genuineness of rise of price of shares within a short period of time that too when general market trend was recessive. But we find that when there are several decisions of Hon'ble Jurisdictional High Court as stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance of the Hon'ble Non-Jurisdictional High Court. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value than the decision of Hon'ble Non-Jurisdictional High Court on the Tribunal. The Hon'ble Supreme Court emphasised therein that the orders of the Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Hence we deem it fit and appro....
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....rte order dated 19/12/2014 passed by SEBI in case of Radford Global Ltd. wherein it was alleged that the LTCG earned by various allottees on preferential basis were not genuine. Accordingly, the said company i.e Radford Global Ltd and the assessee together with various other parties were restrained from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner by SEBI, till their final investigation was completed. However, on completion of final investigation, the SEBI has passed a final order dated 20/09/2017 where it has been held that investigations did not find any adverse evidence/findings in respect of violation of provisions of SEBI (Prohibition of Fraudulent and unfair Practices relating to Securities Market) Regulations, 2003 in respect of 82 persons and the company Radford Global Ltd. 12.3 Based on the above discussion, the ld.CIT(A) concluded that appellant's transactions were executed through a registered broker with genuine documentation. Payments were made through account payee cheques and subjected to Securities Transaction Tax (STT). SEBI‟s final order in 2017 acquitted Radford Global Ltd of s....
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....egistered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in P....
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....it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert un....
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....e was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of 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) were in conflict 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 ....
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....ere high. There is no whisper in the assessment order that there is any kind of involvement of the assessee in case of any price rigging or price increase. With regard to the SEBI report relied on by the it was pointed out that neither any investigation nor any inquiry has been conducted by SEBI in case of trading in the scrip of MKEL. The ld. AR further submitted that the SEBI report relied on by the ld. DR does not contain any adverse comment about the assessee but only names the company as a penny stock company and that the Ld. DR failed to prove or justify how this report is connected to the assessee who is not at all connected with any kind of nexus if any run by some brokers. She on being duly advised, invested in the scrip and when the price was on a higher side he sold the shares. There is nothing unusual about it. It shall be appreciated that the startling spike in the share price and other factors may be enough to circumstances that might create suspicion; however, the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye t....
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.... "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition made by the Assessing Office without discussing the case on merit? 2. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering that the assessee could not prove the genuineness of transaction of share during the assessment proceedings?" 3. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) is justified in deleting the addition u/s 68 made by the Assessing Officer, without appreciating the fact involved in this case that M/s PS IT Infrastructure & Services' (formerly known as Parag Shilp Investments Ltd.) is a penny stock company and the sale of shares of the penny stock company was pre-arranged method of assessee? 4. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made u/s. 68 of the Income Tax Act, 1961 proceeds on sale of the Scrip on which LTCG was claimed by the assessee, without appreciating the overwhelming evidence such as purchases shown to have been made off market, s....
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....scent Digital Technologies Pvt Ltd on 22.03.2012 from M/s Octopus Infotel Pvt Ltd for a consideration of Rs. 1,50,000/-.Subsequently M/s Crescent Digital Technologies Pvt Ltd was merged with PS IT Infrastructure & Services (formerly known as Parag Shilp Investment Ltd) vide High Court of Bombay order and the shares of PS IT Infrastructure & Services were credited to demat account. Further, she had sold 3,000 shares on 25.08.2014 for a consideration of Rs. 17,65,088/- and 12,000 remaining shares were split into 1,20,000 shares of face value of Rs. 1/- each and resulting shares were sold between 16.09.2014 to 22.10.2014 for a total consideration of Rs. 80,33,552/-. The AO dealt on the various facts of transactions, modus operandi and the report of the Kolkata investigation wing and the statement of persons and has doubted the earning of Long Term Capital Gains. The A.O found that there was a no correlation of the price rise and fall of the share price and was not satisfied with the explanations and material information and observed that the transactions were not genuine and made addition as unexplained cash credit u/s 68 of the Act of Rs. 98,37,400/-and estimated unexplained expendit....
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....d. 20.1 It is further submitted that during the appellate proceedings the documents had submitted copy of Share Certificates issued by the above company along with copies of transfer recorded in favour of the assessee, copy of Share Transfer Forms filed with the Company for the purpose of transfer of the above shares in the name of the assessee, copy of receipt issued by Transferor Octopus Infotel Pvt Ltd, towards receipt of Sale Proceeds by transferor, copy of Cheque issued to Transferor, copy of Letter issued by Company enclosing duly transferred Share Certificates in the name of the assessee, copy of DEMAT Account for the period for a period of 4 years starting from1.4.2012 to 31.3.2015,copy of Contract Notes issued by Broker i.e. Sanghvi Brothers Brokerage Ltd, for the sale of above shares etc. Accordingly, the AO was directed to delete the addition made u/s 68 and 69C of the Act totalling Rs. 1,01,32,522/-. 21. We have carefully considered all the relevant facts of the case. It is noticed that the ld.CIT(A) has exhaustively dealt with the appeal before him and after examining all aspect of the case, the documents filed by the assessee and the decisions of ITAT came to th....