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TMI Blog2021 (4) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... iry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that income of the assessee has escaped assessment . According to us, the information given by DIT(Inv) can only be a basis to ignite/trigger and be the starting point to enquire; and at that stage the information of DIT (Inv.) can be termed as a foundation only to form reason to suspect and not reason to believe escapement of income which is the jurisdictional fact law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147 of the Act. And the reason to suspect cannot be the basis for usurping jurisdiction to reopen u/s. 147 of the Act, for conducting roving/further examination to be resorted by him in order to strengthen the suspicion to an extent which can later transform the suspicion to create the belief in his mind that income chargeable to tax has escaped assessment. Merely on an allegations levelled by DIT (Inv.), as in this case explaining the general modus operandi carried out by un-scrupulous persons in suspected transactions to earn bogus LTCG, can only raise suspicion in the mind of the AO (which fact we have pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating the same as unexplained cash credit. He also made a further addition of ₹ 4,154/- u/s 69C of the Act by treating the commission allegedly paid by the assessee for obtaining the bogus entry for claiming long term capital gain as unexplained expenditure. Accordingly, the total income of the assessee for the year under consideration was determined by the AO at ₹ 10,20,520/- in the assessment completed u/s 147/143(3) of the Act vide an order dated 27.12.2017. 3. Against the order passed by the AO u/s 147/143(3), an appeal was preferred by the assessee before the Ld. CIT(A) challenging both the additions made by the AO to his total income u/s 68 on account of unexplained cash credit and u/s 69C on account of unexplained expenditure. The Ld. CIT(A) however did not find merit in the submissions made on behalf of the assessee in support of his case on both these issues and dismissing the appeal of the assessee, he confirmed both the additions made by the AO to the total income of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 4. During the course of appellate proceedings before the Tribunal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation revealed that various persons had subscribed to the shares of these penny stock companies for the purpose of claiming long term capital gain to bring unaccounted money into their books without payment of tax. As per the modus operandi discussed in the investigation report, those who wants to book bogus capital gain are asked to buy shares when the price is low and sell the shares at a pre-determined particular date and time to avail the bogus entry of desired capital gain. Investigation carried out by the Directorate of Income Tax (Investigation), Kolkata revealed that the share price of Concrete Credit Ltd., one of those penny stock companies listed with Calcutta Stock Exchange was also artificially rigged to provide entry of bogus long term capital gain. As per the information furnished in the report, the assessee had transacted in shares of Concrete Credit Ltd. during the financial year 2009-10. On perusal of the return, it is seen that the assessee has also claimed LTCG of ₹ 8,30,797/- during the relevant financial year. But as per the information the assessee had transactions in the scrips of Concrete Credit Ltd. during the financial year 2009-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons recorded by the AO, we understand that the AO received information from DIT (Inv.), Kolkata dated 21.09.2015 that the investigation carried out by the Directorate revealed that a very large number of persons had taken entries of huge bogus long term capital gain in an organized manner through share transactions of penny stock companies listed with Calcutta Stock Exchange with the involvement of the promoters of the penny stock companies, unscrupulous broker and entry operators. In the reasons recorded it was also stated that the aforesaid letter was accompanies by CD which contains Investigation Report, details of transaction and other related information. In the reasons recorded, the AO noticed that the investigation by the DIT(Inv.) focused on nine penny stock companies which were listed with the Calcutta Stock Exchange and then after narrating the general modus operandi of these unscrupulous people the AO notes that the investigation carried out by the DIT(Inv.) revealed that the share price of M/s. Bakra Pratisthan Ltd. (hereinafter BPL ) is one of the penny stock companies listed with the Calcutta Stock Exchange which was also artificially rigged to provide entry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of mind by himself is nothing but an action taken by AO based on the strength of borrowed belief of DIT (inv) and not that of AO, which vitiates the very assumption of jurisdiction by AO to re-open the assessment, which finding of us will be clear when we analyze the reasons recorded in detail infra. 18. From the aforesaid reasons recorded by AO it is evident that other than the general information given by DIT (inv) there is no other material the AO collected himself after preliminary enquiry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that income of the assessee has escaped assessment . According to us, the information given by DIT(Inv) can only be a basis to ignite/trigger and be the starting point to enquire; and at that stage the information of DIT (Inv.) can be termed as a foundation only to form reason to suspect and not reason to believe escapement of income which is the jurisdictional fact law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147 of the Act. And the reason to suspect cannot be the basis for usurping jurisdiction to reopen u/s. 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation given by DIT(Inv.) need further probe to find out the reality. So the AO admits that the information given by DIT(Inv.) has not rendered him to make up his mind to believe that income chargeable to tax has escaped assessment. At the cost of repetition we say that an adverse information against an assessee may trigger reason to suspect , as in this case was, and it was incumbent on his part pursuant to the information reaching his hand (AO), to make reasonable enquiry and collect material which could make him believe, that there is in fact an escapement of income, which exercise AO admittedly did not do and has blindly copied the contents of the DIT(Inv) report and proceeded to reopen the assessment/ intimation passed u/s. 143(1) which action of AO cannot be countenanced. In other words, when the AO was in receipt of the information from the DIT(Inv.) he ought to have made reasonable enquiry and collect materials which would make him believe, that there is escapement of income. As stated earlier, it has to be remembered that information is not synonymous to truth. At the cost of repetitions, we note that AO simply on the basis of the investigation report of DIT (Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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