2024 (8) TMI 1008 - AT - Income Tax

Validity of Reassessment proceedings - reasons to believe - Addition u/s 68 - treating the short- term capital gains earned by the assessee from sale of shares as bogus - HELD THAT - We find that in the present case return of income filed by the assessee was not selected for scrutiny. AO based on the information received from the DDIT(Investigation), Unit-6(2), Mumbai initiated the reassessment proceedings. We are of the considered view that the said information constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee and on the basis of the aforesaid information, the AO initiated proceedings under section 147 of the Act and issued a notice u/s 148. Thus, sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act. Bogus STCG - The lower authorities have not examined the details furnished by the assessee and have not analysed the claim of the assessee in light of those details. Further, no material is available on record to show that the assessee was put to notice before disputing the source of the payment made for purchasing the shares of VAS Infrastructure Ltd. From the record it is also evident that an opportunity to cross-examine the broker on whose statement Revenue has placed reliance was also not provided to the assessee. Accordingly, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after considering the details filed by the assessee. Since the matter is restored to the file of the AO, the assessee shall be at liberty to furnish any other information in support of his claim. Appeal by the assessee is partly allowed for statistical purposes.

Summary

Issues:
Challenging the addition made under section 68 of the Income Tax Act regarding short-term capital gains earned from sale of shares as bogus.

Detailed Analysis:

1. Initiation of Reassessment Proceedings:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) confirming the addition made by the Assessing Officer under section 68 of the Act. The reassessment proceedings were initiated based on information received regarding the assessee's transactions in a penny stock scrip, M/s VAS Infrastructure Ltd. The AO treated the transaction as bogus, adding the entire sale consideration to the assessee's income from other sources.

2. Contentions of the Assessee:
The assessee contended that the short-term capital gains earned from the transactions were genuine and offered for taxation. The transactions were supported by contract notes, account statements, and bank records. The assessee argued that the information received regarding the scrip's price volatility did not prove the transactions were bogus.

3. Judicial Analysis - Reassessment Proceedings:
The Tribunal found the initiation of reassessment proceedings valid, citing the relevant material received from the Investigation Wing. Referring to legal precedent, the Tribunal upheld the validity of the reassessment based on the belief that income had escaped assessment.

4. Merits of the Case:
During the reassessment proceedings, the assessee submitted details of the transactions in VAS Infrastructure Ltd and provided supporting documents. However, the AO did not consider these submissions and relied on statements without verifying the source. The CIT(A) upheld the addition based on unproven sources of funds in the bank statement.

5. Judicial Analysis - Merits of the Case:
The Tribunal noted that lower authorities failed to analyze the details furnished by the assessee and did not provide an opportunity for cross-examination or notice regarding disputed sources of funds. Consequently, the Tribunal set aside the impugned order and directed the AO to re-adjudicate the issue, considering all details provided by the assessee and allowing for further submissions.

6. Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, emphasizing the need for a thorough examination of the assessee's submissions and providing opportunities for clarification and cross-examination. The matter was remanded to the AO for fresh adjudication in accordance with the directions provided.

Judgment:
The Tribunal set aside the impugned order and allowed the assessee's appeal for statistical purposes, directing a re-examination of the case with proper consideration of the details furnished by the assessee.