TaxTMI 
TaxTMI 
2025 (3) TMI 2048
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....aised by the assessee, are as follows: 1. The Hon'ble Principal Commissioner of Income Tax, Rajkot- 1, Rajkot has erred in passing the order u/s. 263 of the IT Act is unwarranted, unjustified and bad in law. 2. The Hon'ble Principal Commissioner of Income Tax, Rajkot -1 Rajkot, has erred in setting aside the issues of (a) Receipts as well as Re-payments of Unsecured Loans (b) Interest earned u/s 244A of the Income Tax Act during the year not offered to Tax, and (c) the assessee has not shown any house hold withdrawals, is unwarranted, unjustified and bad in law. 3. The Hon'ble Principal Commissioner of Income Tax, Rajkot-1, Rajkot has erred in Investment made in Penny Stock is treated as Bogus or treated as Cash Credit u/s.68 of the IT Act, 1961, is totally unwarranted, unjustified and bad in law. 4. The Hon'ble Principal Commissioner of Income Tax, Rajkot -1, Rajkot has erred in wrongly mentioned the facts in body of order and set aside the Speaking order passed by Assessing Officer as treated as erroneous and prejudicial to interest of the revenue within the meaning of section 263 of the IT Act, it is totally wrong, unwarranted,....
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....ing inquiries or verification which should have been made. Accordingly, the impugned assessment order is left erroneous and prejudicial to the interest of revenue, as income was under assessed to that extent. In view of the above, a show cause notice dated 28/02/2019, was issued by ld. PCIT, proposing to subject the assessment order, passed by the assessing officer under section 143(3) of the Act, dated 26/12/2017, for revision u/s 263 of the Income tax Act. In response to the said notice, the assessee made written submissions on 13/03/2019. The gist of the assessee`s submission is as under: "1. With respect to the claim of exempt Capital Gain, the assessee has contended that it is not necessary that all the investment made in penny stock is treated as bogus or treated as cash credit u/s 68 of the Income tax Act 1961 (Para 3 of submission). The assessee has further stated that there no iota of deficiencies of any kind found with regard to the documentation (Para 4 of submission). At para 1.5 of the submission, the assessee has emphasized that every transaction has been accounted, documented and supported. The payments are made through banking channels and transfer of share....
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.... for tax through oversight. 6. Regarding house hold expenses, it is submitted that Shri Anil Amrutlal Gandhi i.e. father of the assessee has made withdrawal towards house hold expenses to the tune of Rs. 1,80,000/-. 10. However, the ld PCIT has rejected the contention of the assessee, and observed, issue-wise, as follows: (1).Issue No.1: Regarding Long Term Capital Gain of Rs. 1,32,35,925/-. The ld PCIT observed that the assessee is only emphasizing on the documentation, banking channels and having satisfied the conditions for claiming the exemption under section 10(38) of the Income tax Act, 1961. The ld PCIT divided the transactions in three parts, viz:(1) Purchase, (2) Holding period, and (3) Sale and then after held that in the present case, even the requisite documentary evidences are found lacking which left the assessment not only erroneous but also prejudicial to the interest of revenue. Moreover, as per the report of investigation wing, if any connivance with any commission agent or entry operator is found then the appropriate amount of commission paid to arrange the accommodation entry in the name of bogus LTCG should also be added as unexplained expe....
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....onsideration. Therefore, the same cannot be claimed as self-occupied property. The ld PCIT also noticed that assessee has reported three more residential properties on her balance sheet, Viz: (1) Flat at Krishna Niwas-1IVPD, vile Parle Mumbai, (2)Sadguru Colony Flat No.101 and (3) Sadguru Colony Flat No.202. As per the provisions of sub-section (4) of section 23 of the Act, if a person hold more than one house property then only one house property can be claimed as self-occupied at his/her option and for remaining properties the annual value of the house or houses, other than the self-occupied one shall be determined under sub-section (1), as if such house or houses had been let out. However, the assessing officer has not gone into this aspect of the residential units reported in the balance sheet of the assessee, which rendered the assessment order erroneous and prejudicial to the interest of revenue. (4). Issue No.4, the ld PCIT noticed that the unsecured loans reported by the assessee at the beginning and at the end of the financial year are as under: Name of the loan provider Opening Receipt Repayment Closing Supporting documents Anil Gandhi HUF ....
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....ment order, there is a reference of long-term capital gain (LTCG), it means that the assessing officer has examined the same and applied his mind. The assessing officer issued notice u/s 142(1) of the Act, which is placed at paper book page no.9 and reply of the assessee is stated on paper book page no.18, about the long-term capital gain, therefore, learned Counsel, submitted that sufficient enquiry was made by the assessing officer, during the assessment proceedings, and not only that the assessing officer has applied his mind and took the plausible view. 13. About the residential property at 'J Cliff', Nr Race course, Rajkot, the ld Counsel stated that it has not been shown in the Balance sheet, as the said flat had not been shown in the Balance Sheet by the assessee, because in case of said property, only satakhat has been executed and the documents were not registered in the name of the assessee. 14. About deemed rent income on the residential property at JVPD, Ville Parle, Mumbai, it was stated by the ld. Counsel that said property has not been given on rent and during the year under consideration the said property was lying vacant. Thus, for Vilay Parle, proper....
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....ducted by the assessing officer vide Sr. nos. 2, 4, 5, of notice u/s 142(1) of the Act. We also find that the very reason for scrutiny was for share transactions. During the assessment proceedings, the assessee submitted its replies before the assessing officer, which is placed at paper book page No.-1 and Page 18-27. Details of purchases and holding period were submitted by the assessee, during the assessment proceedings, which were examined by the assessing officer( vide PB -1, Page 32-38, PB-2, Page 1-11). All Purchases were made by banking channel, and details of all purchases, are as follows: F.Y. Dates of Purchase of shares No. of Shares Cost (in Rs. ) Evidence -PB Page Ref. 2012-13 27-01-2012 30-01-2012 31-01-2012 1,51,800 25,77,603/- PB - 2, Page 1-13 2013-14 18-03-2013 22-03-2013 1,02,000 23,85,698/- PB - 2, Page 1-13 Total 2,5,38,00 49,63,301/- (after split, total shares 25,38,000) The details of sales of the shares were submitted by the assessee, which is placed at paper book page number 39-55. The Sale consideration was received through banking channel ( vide PB- 59-64). The average holding p....
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.... of the case and in law, the decision of Appellate Tribunal is ex facie perverse because the Appellate tribunal deleted the addition of Rs. 2,10,474/- made on account of bogus long term capital gain, without appreciating the entire gamut of fact that the assessee transacted in penny stock namely M/s. Devika Proteins Ltd. thus earning bogus Long term Capital Gain and claiming it to be exempt under section 10(38) of the Income-tax Act?" 3. The assessee filed the return of income for the assessment year 2011-12 on 29-3-2012 declaring his total income Rs. 3,11,490/-. Subsequently the assessment was reopened as information was received that assessee has indulged into script of shell company and had claimed long term capital gain on sale of shares of Devika Proteins Limited to the tune of Rs. 2,10,474/- and that the amount was claimed as exemption under section 10(38) of the Income-tax Act, 1961 (hereafter referred to as 'the Act') 3.1 The Assessing Officer made addition of the said amount. The entire transaction was treated as bogus and in the nature of penny stock. By adding Rs. 2,10,474/- under section 68 of the Act, total income was assessed at Rs. 5,21,964/....
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....s. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short time. Therefore, we find that assessing officer made the addition based on the guess work. The Hon'ble Supreme Court in Umacharan Shah & brothers Vs CIT (37 ITR 271) held that suspicion howsoever strong, may be cannot substitute the place of evidence. Similarly the Hon'ble Supreme Court case of Omar Salav Mohammad Sait ( 37 ITR 151 SC) also held that no additions can be made on the basis of surmises, suspicion and conjecture. 22. We find that in the following cases, the Hon`ble jurisdictional Gujarat High Court, has deleted the addition, on account of penny stock. (i) Mamta Rajivkumar Agarwal,[2023] 155 taxmann.com 549 (Gujarat) "Where assessee had sold shares of SNCFL and earned long-term capital gains and Assessing Officer alleged that transaction was a penny stock deal aimed at illegitimately claiming long-term capital gain exemption under section 10(38), since there was no evidence available on record suggesting that assessee or his broker was involved in rigging up of price of script of SNCFL, addition on account of LTCG claimed a....
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....ation of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT's finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Based on these facts and circumstances, we quash the order dated 24.03.2021 passed by the ld PCIT under section 263 of the Act, so far, first issue is concerned. 25. About claim of interest u/s 24 of the Act, in respect of House property in "J KLIF" which was shown in the balance sheet under the head "Loans and Advance as "Cliff Flat Booking Advance" ( vide PB-69), as only Satakhat was executed and the purchase deed was not registered. This was replied to assessing officer vide PB1, Page 26, and also replied to the Ld.PCIT, during the revision proceedings. The ledger account of the same was filed to PCIT (vide PB-1, Page 69). Hence we find that during the assessment proceedings, assessing officer has applied his mind and examine the issue under consideration, therefore, order passed by the assessing officer is neither erroneous nor prejud....
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....mmissioner of Income Tax, Rajkot- 1, Rajkot, has erred in wrongly mentioned the facts in body of order and set aside the Speaking order passed by Assessing Officer, as treated as erroneous and prejudicial to interest of the revenue within the meaning of section 263 of the IT Act, it is totally wrong, unwarranted, unjustified and bad in law. 5. Your applicant reserves the right in addition or alteration in the grounds of appeal at the time of hearing. 31. At the outset, ld. Counsel for the assessee, begins by pointing out that revision order under section 263 of the Income tax Act 1961, dated 30.03.2021, was passed by the ld. PCIT, on dead person ( dead assessee), despite the fact that during the revision proceedings, under section 263 of the Act, the legal heirs of the assessee has intimated about death of the assessee, to ld. PCIT, on 04.03.2019, however, ld. PCIT has framed the revision order under section 263 of the Act, dated 30.03.2021, on dead assessee, therefore, order passed by the ld. PCIT, does not survive in the eye of law, and should be quashed on this score only. The ld. Counsel for the assessee, narrated before the Bench, the following important events/dat....
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....We further noticed from the order of Pr.CIT that he has passed order in the name of deceased-assessee who was not in existence on the date of passing of the revisional order u/s.263 of the Act. We also agree with the case law relied on by the ld. AR in the case of M. Hemanathan (supra), wherein the Hon'ble Madras High Court in para 12 has held as under "12. But unfortunately, the said contention loses sight of the settled position that any proceeding initiated against a dead person is a nullity. The contention of the learned Standing Counsel for the Department loses sight of one important distinction between a case where the proceedings are initiated against a person, who is alive, but continued after his death and a case of proceedings initiated against a dead person himself. If the proceedings had been initiated against a person, who was alive, and they were continued after his death after putting his legal heirs on notice, those proceedings, under certain circumstances, may be saved. Such a situation is also contemplated in civil proceedings and a provision is made in the Civil Procedure Code itself under Order XXII Rule 4. Therefore, the cases where the very procee....