2024 (6) TMI 1199 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained money under Section 69A - exemption u/s 10(38) wrongly claimed - Shares were not genuinely obtained, and the conduct of the assessee raised suspicions regarding the sale of shares at a higher rate - HLED THAT - AO in the Assessment Order has given the finding in respect of the assessee s purchase and sale activities wherein it was stated that the sale consideration is in fact first paid by the assessee in cash who has trusted confidence in broker but the said fact appears to be not correct. AO has not stated out as to how the assessee is involved in price variation of the said scrip of Turbotech Engineering Limited during that period while selling the said shares/scrip. Besides this, the suspension of the said scrip came much after selling of the said scrip carried out by the assessee. Therefore, the assessee has rightly claimed exemption u/s 10(38). AO as well as the CIT (A) has not established that the assessee was involved in the price manipulation of the sales scrip and, therefore, this cannot be treated as unexplained money u/s 69A. Reopening of the assessee s case, the reopening was properly done with proper procedure followed by the AO and, therefore, ground in that respect is dismissed but on merit i.e. ground no.2 (actually 3) is allowed.

Summary

Issues involved:
1. Validity of the order passed by NFAC
2. Legality of reopening of assessment under Section 148
3. Addition of Rs.38,29,680 under Section 69A
4. Violation of natural justice principle
5. Lack of statement provision and cross-examination
6. Justification of interest charges under Section 234
7. Initiation of penalty under Section 271(1)(c)

Detailed Analysis:
1. The appeal was filed against the order passed by the CIT (A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2014-15. The grounds of appeal included challenging the legality of the NFAC order, reopening of assessment under Section 148, addition under Section 69A, violation of natural justice principle, lack of statement provision and cross-examination, justification of interest charges under Section 234, and initiation of penalty under Section 271(1)(c).

2. The assessee filed the return of income, which led to the issuance of notices under various sections of the Income Tax Act. The Assessing Officer made additions based on the purchase and sale of shares of Turbotech Engineering Limited, claiming unexplained money and commission paid. The assessee then appealed before the CIT (A), who partly allowed the appeal.

3. The arguments presented included the justification of reopening the assessment, the genuineness of share purchase, and reliance on various legal decisions to support the case. The Departmental Representative (DR) contended that the shares were not genuinely obtained, and the conduct of the assessee raised suspicions regarding the sale of shares at a higher rate.

4. After hearing both parties and examining the evidence, the Tribunal noted a delay in filing the appeal but condoned it. The Tribunal found that the assessee had purchased shares through private placement, paid by cheque, and converted them to dematerialized form before selling. The Tribunal concluded that the assessee rightfully claimed exemption under Section 10(38) and was not involved in price manipulation, thus rejecting the addition under Section 69A.

5. The Tribunal dismissed the grounds related to the reopening of the case but allowed the appeal on its merits. Consequently, the appeal of the assessee was partly allowed, and the order was pronounced on January 17, 2024.