2023 (9) TMI 476 - AT - Income Tax

Reopening of assessment u/s 147 - addition made on account of penny stock transaction - Bogus LTCG - HELD THAT - It is pertinent to note that from the Assessment Order the AO has not categorically mentioned as to how VAS Infrastructure Limited script itself was blacklisted from SEBI report or not. Besides this, the Assessing Officer has also not given the details as to how the assessee is involved in manipulation of the bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss entries. AO failed to give the description as to how the assessee is involved in anything related to wrongly calming the Short Term Capital Loss or Long Term Capital Gains. The CIT(A) also failed to give the reasons as to how the transactions of the assessee while dealing with VAS Infrastructure Limited in the present case is a bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss. AO has also not mentioned as to under which provision of Income Tax Statute the addition has been made. Thus, the Assessing Officer was not justified in making the addition - Thus, the appeal of the assessee is allowed.

Summary

Issues involved:
The appeal against the order passed by CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2012-13.

Grounds of appeal:
1. The CIT(A) passed an ex-parte order without considering the circumstances.
2. The CIT(A) erred in confirming the AO's reopening of the case under Section 147.
3. The CIT(A) confirmed the addition without considering documentary evidences.
4. The addition made treating sale of shares as a penny stock transaction was erroneous.
5. The order passed by the CIT(A) was contrary to law and facts.

Details of the Judgment:

1. The case involved trading in VAS Infrastructure Limited shares for Rs. 3,33,411 during the Financial Year 2011-12. The Assessing Officer reopened the case under Section 147, making an addition of Rs. 3,33,411 due to non-compliance with notices. The assessee declared total income of Rs. 1,99,700.

2. The assessee appealed the Assessment Order to the CIT(A), who dismissed the appeal.

3. The assessee requested details of the broker involved in the transactions but was not provided with the opportunity to respond adequately. The transactions were disclosed in audited accounts and returns filed under the Income Tax Act. However, the authorities did not consider the details provided by the assessee.

4. The Assessing Officer and CIT(A) failed to provide essential transaction details like date, broker's name, and quantity traded, leading to the assessee's inability to explain. The assessee traded through specific brokers, and the transactions were reflected in audited accounts. The Tribunal in a similar case had clarified that VAS Infrastructure Limited was not declared as a penny stock during the relevant period.

5. The Assessing Officer made the addition without specifying how the company was blacklisted or how the assessee manipulated gains or losses. The CIT(A) also did not provide reasons for treating the transactions as bogus. The addition of Rs. 3,33,411 was deemed unjustified, and the appeal of the assessee was allowed.

6. The appeal filed by the assessee was allowed.

Order pronounced on 6th September 2023.