2022 (5) TMI 1261 - AT - Income Tax

Reopening of assessment u/s 147 - Bogus transaction of shares - HELD THAT - Assessee has engaged into the bogus penny stock transaction through bogus entry operator controlled by Mukesh Choksi. The authorities below have properly analysed the facts and have taken correct view of the matter. Nothing was brought before me to rebut the aforesaid findings on merits. Accordingly we uphold the order of learned CIT(A) - Decided against assessee.

Issues Involved:
1. Reopening of assessment under section 147 without mentioning transactions in shares in the notice under section 148.
2. Approval for reopening obtained from Commissioner of Income Tax -16 instead of Joint/Additional Commissioner as per section 151(2).
3. Disallowance of Long Term Capital Gains and addition of sale proceeds of shares without proper evidence.
4. Disposal of appeal without obtaining Remand Report.
5. Addition of commission on alleged bogus transaction.
6. Denial of opportunity for cross-examination based on recorded statements.

Analysis:

Reopening of Assessment:
The appeal challenged the reopening of assessment under section 147, citing lack of mention of share transactions in the notice under section 148. However, the CIT(A) upheld the reopening, relying on legal precedents and the decision of the Hon'ble Gujarat High Court in similar cases. The High Court emphasized the AO's prima facie belief that income had escaped assessment based on information from the Investigation Wing. The appellant failed to provide evidence to counter the AO's decision, leading to the affirmation of the reopening.

Validity of Reopening Approval:
The appellant argued that approval for reopening was obtained from the Commissioner of Income Tax -16 instead of the prescribed Joint/Additional Commissioner as per section 151(2). However, the focus of the judgment was on the substantive issues related to the transactions in shares rather than the procedural aspect of approval, as the legal analysis primarily revolved around the factual matrix and merits of the case.

Disallowed Long Term Capital Gains:
The AO disallowed Long Term Capital Gains and made additions without substantial evidence, relying on information from the Investigation Wing. The CIT(A) upheld the disallowance based on findings that the transactions with certain intermediaries were deemed bogus. The AO's decision to disallow the gains and make additions was supported by the lack of reliability in the broker's registration status, leading to the conclusion that the sales transactions were baseless.

Enhancement of Sale Proceeds:
The CIT(A) issued a notice for enhancement of the addition made by the AO, considering the entire sale transaction as a sham based on the involvement of banned brokers and non-registered entities. The appellant's non-compliance with the enhancement notice further strengthened the conclusion that the sales were bogus/sham transactions. The ITAT upheld the decision, emphasizing the need to consider the surrounding circumstances to determine the reality of transactions.

Commission on Alleged Bogus Transaction:
The AO's addition of commission on the alleged bogus transaction was deemed reasonable, and the CIT(A) upheld the action. The ITAT dismissed the grounds of appeal related to this issue, supporting the AO's decision based on the circumstances surrounding the transaction.

Cross-Examination Opportunity Denied:
The appellant raised concerns about the denial of the opportunity for cross-examination based on recorded statements. However, the judgment did not delve deeply into this issue, focusing more on the substantive aspects of the case related to the transactions in shares and the credibility of the brokers involved.

In conclusion, the ITAT dismissed the appeal by the assessee, upholding the orders of the CIT(A) and the AO based on the analysis of the factual matrix, legal precedents, and the merits of the case related to the alleged bogus transactions in shares.

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