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2022 (10) TMI 565 - AT - Income Tax


Issues:
Challenge to impugned order dated 03/01/2022 under section 250 of the Income Tax Act, 1961 by the assessee for the assessment year 2013-14.

Analysis:

1. Reopening of Assessment:
The assessee challenged the impugned assessment order on various grounds, including the lack of cogent reasons for reopening the assessment and failure to follow the procedure laid down by the Supreme Court. The Assessing Officer (AO) reopened the assessment based on information regarding an organized racket of generating bogus entries of long-term capital gains in penny stocks. The AO treated the long-term capital gains claimed by the assessee as unexplained investment and added it to the total income. The objections raised by the assessee against the reopening of assessment were rejected by the AO. However, the Tribunal found that the SEBI had revoked its earlier interim directions against the entities involved, including the assessee, upon completion of the investigation. Despite this fact being brought to the notice of the AO and the Commissioner of Income Tax (Appeals), the addition made by the AO was upheld. The Tribunal held that since the SEBI had found no violation by the assessee and revoked the directions, there was no basis for sustaining the addition made by the AO. Consequently, the Tribunal directed the AO to delete the impugned addition.

2. Long-Term Capital Gains (LTCG) Disallowance:
The AO disallowed the exemption claimed by the assessee under section 10(38) for LTCG, treating it as unexplained investment based on assumptions and presumptions. The Tribunal noted that the AO's conclusion was based on the transaction being considered a penny stock transaction resulting in bogus gains. However, SEBI's investigation and subsequent orders revealed that the assessee's transaction was not violative of the relevant laws. The Tribunal found no basis for the disallowance and directed the AO to delete the addition of LTCG. As a result, the addition of commission charged by brokers was also directed to be deleted.

3. Relief Granted and Conclusion:
The Tribunal allowed the assessee's appeal, directing the deletion of the impugned additions made by the AO. Since relief was granted on the merits, the grounds pertaining to the invocation of reassessment proceedings under section 147 of the Act were considered academic. The Tribunal pronounced the order in favor of the assessee on 13/10/2022, providing a comprehensive analysis and relief based on the SEBI's findings and the lack of basis for the additions made by the AO.

This detailed analysis of the judgment highlights the key issues raised by the assessee, the basis of the AO's additions, and the Tribunal's decision to grant relief based on the SEBI's investigation findings and the lack of justification for the impugned additions.

 

 

 

 

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