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2021 (12) TMI 1127 - AT - Income TaxReopening of assessment u/s 147 - eligibility of reasons to believe - reason to suspect OR reason to believe - HELD THAT - As in the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing truly and fully material facts necessary for assessment. Under the circumstances, the assumption of the jurisdiction to reopen the assessment beyond the period of four years in exercise of powers u/s 147 of the Act is bad in law and contrary to the provisions of section 147 of the Act. Under the circumstances, on the aforesaid ground alone, the impugned reassessment proceedings deserve to be quashed and set aside. See SHRI NISHANTKANTILAL PATEL, SMT MUKTABEN NISHANTBHAI PATEL VERSUS INCOME TAX OFFICER, WARD-2 (2) , BHARUCH 2021 (2) TMI 531 - ITAT SURAT The reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. From our above analysis of reasons recorded in the assessee s case under consideration, we note that the reasons recorded by the assessing officer falls in the zone of reason to suspect and not reason to believe , therefore we quash the reassessment proceedings. - Decided in favour of assessee. Addition u/s 68 - Bogus share transactions - penny stock purchases - HELD THAT - We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee. We note that the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidences in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidences clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore delete the addition - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment under Section 147 by issuing notice under Section 148. 2. Disallowance of exemption claimed under Section 10(38) on account of Long Term Capital Gain (LTCG). 3. Addition under Section 68 for treating LTCG as accommodation entry. 4. Addition under Section 69C for unexplained expenditure on commission payment for procuring accommodation entry. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 147 by Issuing Notice under Section 148: The assessee challenged the reopening of assessment under Section 147, arguing that the reasons recorded by the Assessing Officer (AO) were based on general information from the Investigation Wing of Kolkata and lacked specific tangible material related to the assessee. The Tribunal noted that the reasons recorded by the AO were not specific to the assessee and were based on borrowed satisfaction from the Investigation Wing’s findings on other assessees. The Tribunal relied on the precedent set by the Division Bench in the case of Shri Nishant Kantilal Patel and Smt. Muktaben Nishantbhai Patel vs. ITO, which held that reopening based on general information without independent application of mind by the AO is invalid. Consequently, the Tribunal quashed the reassessment proceedings initiated under Section 147/148. 2. Disallowance of Exemption Claimed under Section 10(38) on Account of Long Term Capital Gain (LTCG): The AO disallowed the exemption claimed under Section 10(38) on LTCG, treating the transactions as accommodation entries. The assessee had claimed LTCG on the sale of shares of Global Securities Ltd. and Sun and Shine Worldwide Ltd., which the AO alleged were penny stocks used for bogus transactions. The Tribunal found that the assessee had provided sufficient documentary evidence, including contract notes, share certificates, and bank statements, to substantiate the genuineness of the transactions. The Tribunal noted that the AO had not found any fault in the documents provided by the assessee and that there was no evidence of cash being recycled. The Tribunal held that the transactions were genuine and that the AO’s disallowance was based on suspicion and conjecture rather than concrete evidence. 3. Addition under Section 68 for Treating LTCG as Accommodation Entry: The AO made an addition under Section 68, treating the LTCG as unexplained cash credits. The Tribunal observed that the AO had not provided any specific evidence linking the assessee to the alleged accommodation entry scheme. The Tribunal emphasized that the assessee had demonstrated the genuineness of the transactions through documentary evidence and that there was no direct nexus between the assessee and the alleged price rigging. The Tribunal held that the addition under Section 68 was unjustified and deleted the addition. 4. Addition under Section 69C for Unexplained Expenditure on Commission Payment for Procuring Accommodation Entry: The AO also made an addition under Section 69C, alleging that the assessee had paid a commission for procuring the accommodation entry. Since the Tribunal had already held that the main addition of LTCG was genuine and not an accommodation entry, it consequently deleted the addition under Section 69C, as it was consequential in nature. Conclusion: The Tribunal allowed the appeals filed by the assessee for both assessment years, quashing the reassessment proceedings and deleting the additions made under Sections 68 and 69C. The Tribunal emphasized that the AO’s actions were based on suspicion and general information rather than specific evidence against the assessee.
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