2019 (1) TMI 2027 - AT - Income Tax

Addition u/s 68 - bogus transactions of purchase and sale of shares for the purpose of laundering his undisclosed income - Assessee s contention is that he has purchased shares through broker via BSE and shares were part of Demat account and payments have been made through banking channel and he is merely an investor - HELD THAT - A.O. has made detailed and comprehensive enquiry with regard to NCL Research Ltd. share assessee has filed Contract Note and shares were purchased through broker via BSE payments have been made through banking channel and held for around two years in the demat account of the assessee and long term capital gain was claimed by the assessee. We consider that the assessee could not appear before the ld. Pr. CIT Therefore in the interest of justice we consider it to appropriate that one more opportunity of hearing should be granted to the assessee. As before passing any order ld. Pr. CIT may also be consider the order passed in case of Smt. Minu Gupta vs. 2018 (12) TMI 1962 - ITAT KOLKATA We restore this case to the file of Pr. CIT for deciding de novo after examination of details to be submitted by the assessee and after affording adequate opportunity of being heard. Appeal filed by the Assessee is allowed for statistical purpose.

Summary

Issues:
Appeal against order of Ld. Pr. CIT under Section 263 - Allegations of bogus transactions for laundering income - Detailed scrutiny of share transactions - Lack of inquiry or inadequate inquiry - Opportunity of hearing to Assessee - Restoration of case for de novo decision.

Analysis:
The appeal was filed against the order of the Ld. Pr. CIT under Section 263 of the Income-tax Act, alleging that the order was void and erred in setting aside the assessment order passed by the DCIT. The Assessee earned income from various sources, including trading shares of 'NCL Research Ltd.' resulting in long term capital gains. The Ld. Pr. CIT observed lack of information on the Demat account of the Assessee and suspected bogus transactions for income laundering. The Assessee contended that shares were purchased through a broker on the BSE, payments made via banking channels, and provided necessary documents to support the transactions.

The Assessee cited precedents where lack of inquiry did not warrant adverse actions under Section 263. The ITAT ruled in favor of the Assessee, stating that without specific adverse materials, the addition under Section 68 could not be sustained. The Assessee's claim of exempt income on LTCG was allowed, and the addition was directed to be deleted. The Assessee also referenced a High Court order distinguishing between lack of inquiry and inadequate inquiry, emphasizing that the Commissioner cannot act solely on a different opinion.

The Ld. CIT/DR alleged that the Assessee misused shares of NCL Research Ltd. for bogus LTCG to conceal undisclosed income. After hearing both sides and examining the records, the ITAT noted the comprehensive inquiry by the A.O. into the share transactions. Due to the Assessee's absence before the Ld. Pr. CIT, the ITAT granted another hearing opportunity. The case was restored to the Pr. CIT for a fresh decision after considering details from the Assessee and the Kolkata ITAT order.

In conclusion, the ITAT allowed the Assessee's appeal, subject to specified conditions, and for statistical purposes. The case was remanded for a de novo decision by the Pr. CIT after a thorough examination of the submitted details and providing adequate hearing opportunities to the Assessee.