2016 (10) TMI 316 - AT - Income Tax

Validity of reopening of assessment - purchase and sale of shares as bogus - Held that - There is a conclusive and final finding of fact that purchases of shares were bogus and sham as was held by the Revenue in the assessment year 2005-06 which has not been dislodged so far as the assessee accepted the said findings which became conclusive, thus the facts in the instant case are distinguishable as against the relied upon case of the assessee in Smt Aarti Mittal (2013 (11) TMI 968 - ITAT HYDERABAD ) on that ground itself. Similarly, contentions of the assessee that the Revenue has accepted the gains on sale of 1500 shares of M/s Shiv Om Investment and Consultancy Limited in the succeeding assessment year 2007- 08 as long term capital gains while processing of return u/s 143(1) of the Act is not of help to the assessee as every assessment year is separate assessment year and merely because the Revenue has not selected the case under scrutiny by issuing notice u/s 143(2) of the Act and framing detailed scrutiny u/s 143(3) of the Act instead chose to process the return u/s 143(1) of the Act without scrutiny will not entitle the assessee to get the well reasoned assessment orders and appellate orders of the learned CIT(A) dislodged in the absence of the cogent material and evidences to demolish the findings of the authorities below. The Revenue in the case of the assessee s brother has also declared the purchase and sale of shares as bogus but brought to tax , gains arising from sale of shares as short term capital gains . This in our considered view, is also not of help as the Revenue in the instant case has come to the conclusive finding which attained finality that the transactions of purchase of shares are sham and bogus transactions camouflaged with an intention to evade taxes - Decided against assessee

Issues Involved:
1. Re-opening of assessment based on information relevant to a different assessment year.
2. Confirmation of computation of taxable income.
3. Treatment of amount realized from the sale of shares as unexplained cash credit.
4. Non-appreciation of the fact that shares sold through a recognized stock exchange were charged to security transaction tax.

Issue-wise Detailed Analysis:

1. Re-opening of assessment based on information relevant to a different assessment year:
The assessee contested the re-opening of the assessment for AY 2006-07 based on information from Addl. CIT (Inv) relevant to AY 2007-08. The Tribunal upheld the re-opening of the assessment under Section 147/148 of the Income Tax Act, 1961, as the information received was fresh and tangible material that had a live link and nexus with the formation of belief that the income had escaped assessment. The Tribunal referenced the Supreme Court decision in ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 291 ITR 500 (SC) to support the re-opening, noting that the original assessment was not framed under Section 143(3), so there was no change of opinion.

2. Confirmation of computation of taxable income:
The assessee's taxable income was computed by the AO at ?5,59,360/- against the returned income of ?66,610/-. The Tribunal found no infirmity in the AO's computation, which was based on the finding that the assessee's claim of purchase of shares was bogus and fabricated. The AO concluded that the assessee’s claim of receipt from the sale of shares was not genuine and treated it as unexplained cash credits, thereby bringing it to tax.

3. Treatment of amount realized from the sale of shares as unexplained cash credit:
The AO treated the amount realized from the sale of shares of M/s Shiv Om Investment and Consultancy Limited as unexplained cash credit. The Tribunal noted that the AO had specific and concrete information indicating that the assessee was indulging in bogus capital gains transactions. The AO's findings, which became conclusive as they were not challenged by the assessee, indicated that the purchase of shares was a sham transaction. The Tribunal upheld the AO's decision, emphasizing that the assessee’s explanation and documentation were insufficient to counter the findings of bogus transactions.

4. Non-appreciation of the fact that shares sold through a recognized stock exchange were charged to security transaction tax:
The assessee argued that the shares were sold through a recognized stock exchange and charged to security transaction tax, making them eligible for exemption under Section 10(38). However, the Tribunal held that since the purchase of shares was conclusively found to be bogus, the subsequent sale and the claim for exemption could not be accepted as genuine. The Tribunal noted that the entire transaction was manipulated to introduce unaccounted money as tax-free long-term capital gains.

Conclusion:
The Tribunal dismissed the appeal, confirming the re-opening of the assessment and the AO's treatment of the sale proceeds as unexplained cash credits. The Tribunal found that the assessee failed to provide sufficient evidence to counter the AO's findings of bogus transactions and upheld the computation of taxable income as determined by the AO. The Tribunal also noted that the acceptance of similar gains in a subsequent assessment year under Section 143(1) did not affect the findings for the current year, as each assessment year is a separate entity.

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