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2023 (1) TMI 312 - AT - Income TaxRevision u/s 263 by CIT - Addition u/s 68 - bogus long-term capital gain from sale of equity shares - HELD THAT - As considering the judgment of the Hon ble Jurisdictional High Court in the case of Swati Bajaj Others 2022 (6) TMI 670 - CALCUTTA HIGH COURT we find that such kind of transactions of earning long-term capital gain from penny stock companies have been held to be bogus. It is also not in dispute that AO has not conducted any enquiry about the said transaction even when the report of the Investigation Wing containing the list of 84 companies found to be penny stock companies was available in the Income Tax Portal, which the AO needs to refer while framing the assessment. Under these given facts and circumstances, we are of the considered view that ld. PCIT was justified in invoking the revisionary proceedings holding the assessment order as erroneous as well as prejudicial to the interest of revenue and also directing the AO to frame the assessment afresh considering the observation in the impugned order. Therefore, the grounds raised by the assessee are dismissed.
Issues Involved:
1. Time-barred appeal due to COVID-19 pandemic. 2. Legitimacy of the Long-Term Capital Gain (LTCG) claimed by the assessee. 3. Validity of the Principal Commissioner of Income Tax (PCIT)'s revisionary proceedings under section 263 of the Income Tax Act, 1961. Detailed Analysis: 1. Time-barred Appeal Due to COVID-19 Pandemic: The Tribunal addressed the issue of the appeal being time-barred by 247 days. The impugned order was passed on 22.06.2020, during the COVID-19 period. The Supreme Court, in suo motu Writ Petition No. 3 of 2020, extended the period of limitation due to the pandemic. Considering this, the Tribunal condoned the delay, stating, "if the COVID period is being excluded keeping in view the Hon'ble Supreme Court's order, then there is no substantial delay in filing the appeal on the part of the assessee." 2. Legitimacy of the Long-Term Capital Gain (LTCG) Claimed by the Assessee: The assessee declared an LTCG of Rs. 51,99,603/- from the sale of shares of CCL International Limited and claimed an exemption under section 10(38) of the Income Tax Act. The PCIT observed that CCL International Limited was identified as a penny stock company involved in generating bogus LTCG to evade tax. The PCIT noted that the Assessing Officer (AO) failed to utilize the evidence provided by the Investigation Wing and did not conduct any enquiry into the transaction. The Tribunal referenced the investigation report which listed 84 penny stock companies and highlighted that these companies had poor financials and manipulated share prices. 3. Validity of the PCIT's Revisionary Proceedings under Section 263: The Tribunal considered the PCIT's revisionary proceedings justified. The PCIT issued a showcause notice under section 263, citing the AO's failure to investigate the transaction despite having access to the Investigation Wing's report. The Tribunal referred to the jurisdictional High Court's decision in Swati Bajaj & Others (2022) 139 taxmann.com 352 (Cal.), which dealt with similar issues and upheld the addition under section 68 of the Act and the revisionary proceedings under section 263. The Tribunal noted that the AO did not conduct any enquiry into the transaction, even though the Investigation Wing's report was available on the Income Tax Portal. The Tribunal concluded that the PCIT was correct in invoking revisionary proceedings, holding the assessment order as "erroneous as well as prejudicial to the interest of revenue" and directed the AO to reassess considering the observations in the impugned order. Conclusion: The Tribunal dismissed the appeal of the assessee, concluding that the PCIT was justified in setting aside the assessment order for fresh consideration. The Tribunal emphasized that transactions involving penny stock companies to generate LTCG were held to be bogus, and the AO's failure to investigate warranted the revisionary proceedings under section 263. The order was pronounced in the open court on November 16, 2022.
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