2024 (8) TMI 421 - AT - Income Tax

Rectification of mistake - Tribunal has observed that the objection of the assessee on the issue of low tax effect was not sustainable - Addition made u/s 68 - Bogus LTCG - unexplained cash credits - whether shares involved were penny stocks? - as submitted AO had elaborately discussed in the assessment order that share as dealt in by the assessee was penny stock and that the CBDT Circular No. 5/2024 was squarely applicable to the facts of the present case and ITAT had rightly rejected the objection of the assessee on the issue of low tax effect - HELD THAT - Whether a share is penny stock or not can t be decided by the Tribunal. This decision is taken by the BSE or the Investigation agencies after analyzing the trend of trading of such stocks. The Investigation Directorate, Kolkata had carried out a detailed study and analysis of such penny stock companies - As in the case of PCIT Vs. Swati Bajaj 2022 (6) TMI 670 - CALCUTTA HIGH COURT has upheld the report of the Directorate of Investigation, Kolkata in respect of penny stock companies. The transaction in the case of the assessee was in respect of shares included in the report of the Investigation Directorate, Kolkata, wherein the share of Unno Industries Ltd. was reported as a BSE listed penny stock. No merit in the objection of the assessee and there is no mistake in our finding as given in the order 2024 (5) TMI 692 - ITAT AHMEDABAD Regarding objection of the assessee to the observations as made in Para 16 of the order, the assessee has quoted only a part of the observation. It was also mentioned in the said Para that It is found from the contract memo that no brokerage was charged by M/s. Jwalaji Suppliers Pvt. Ltd., Kolkata for sale of the shares to the assessee. The broker in Calcutta was after all doing a business and not running a charity. It is, thus, apparent that finding as given by the Tribunal was not only on the basis of the portion of the order to which the assessee has raised objection. The finding as recorded by the Tribunal is not disputed as incorrect and no mistake in the findings has been pointed out. By raising objection in respect of this finding, the assessee has precisely requested to recall the order and to allow another opportunity of being heard. The provision of Section 254(2) of the Act is intended to only rectify the mistake apparent from the records and we don t find any such mistake apparent in the order. The power of Section 254(2) of the Act cannot be utilized to recall and review the order on its merit. M.A. filed by the assessee is required to be dismissed for the reasons as discussed above and also on account of judicial discipline following the decision of the Hon ble Supreme Court in the case of Reliance Telecom Ltd. 2013 (9) TMI 374 - ITAT MUMBAI

Summary

Issues Involved:
1. Modification of the tribunal's order in ITA No. 247/Ahd/2024 for A.Y. 2014-15 based on alleged mistakes.
2. Assessment of whether the objection of the assessee on the issue of low tax effect was sustainable.
3. Determination of whether shares involved were penny stocks and if the CBDT Circular No. 5/2024 applied.
4. Analysis of the observations made in the tribunal's order dated 03.05.2024.

Issue 1: Modification of Tribunal's Order:
The assessee filed a Miscellaneous Application seeking to modify the tribunal's order in ITA No. 247/Ahd/2024 dated 03.05.2024 for A.Y. 2014-15. The application highlighted two alleged mistakes in the order. The first mistake was related to the objection of the assessee on the issue of low tax effect. The assessee argued that the shares involved were not penny stocks, as confirmed by other cases, and thus, the appeal should have been dismissed based on this ground. The second mistake pointed out was regarding a specific observation made by the tribunal in the order.

Issue 2: Objection on Low Tax Effect:
The tribunal rejected the objection of the assessee on the issue of low tax effect, citing the CBDT Circular No. 5/2024, which exempted certain cases from the monetary limit for filing an appeal. The tribunal found that the case involved organized tax evasion through bogus capital gain using penny stocks, making it an exception to the monetary limit rule. The assessee argued that the shares involved were not penny stocks, citing a decision from ITAT, Delhi, but the tribunal upheld its decision based on the investigation report verifying the shares as penny stocks.

Issue 3: Penny Stock Classification and CBDT Circular:
The tribunal determined that the shares in question were indeed penny stocks based on the investigation report, making the case fall under the exception listed in the CBDT Circular No. 5/2024. The assessee's reliance on a previous case to argue against the penny stock classification was deemed insufficient, as the tribunal emphasized that such a determination is made by the BSE or investigation agencies. The tribunal found no merit in the objection raised by the assessee regarding the penny stock classification.

Issue 4: Analysis of Tribunal's Observations:
The tribunal addressed the specific observation raised by the assessee in the order, emphasizing that the objection did not point out any mistake in the findings. The tribunal clarified that the power under Section 254(2) of the Act is meant to rectify mistakes apparent from the records and cannot be used to recall or review orders based on their merits. Citing a Supreme Court decision, the tribunal concluded that the order could not be recalled based on the objections raised by the assessee.

In conclusion, the tribunal dismissed the Miscellaneous Application filed by the assessee, upholding its original order and decisions based on the applicable legal provisions and precedents.