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TMI Blog2022 (11) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... no other detail filed by the assessee company. Also there is no enquiry specifically raised by the assessee company about the alleged penny stock companies nor there is any discussion in the body of the assessment order. One of the reasons for selection of scrutiny was suspicious transaction of dealing in penny stock companies by the assessee. Various details are available on the income tax portal for the assistance of the Assessing Officer for examining the dubious and sham transactions. Neither any effort seems to have been made by the Assessing Officer to call for the relevant details of all these so called penny stock company which have been dealt in by the assessee company nor any financial details of these companies have been called for nor has any discussion been made. Had there been any information called for by the Assessing Officer in the note sheet, the same would have been made available on record and in the absence of the same, it is presumed that no enquiry was conducted by the AO on this issue. If the assessee s case is selected for scrutiny for specific reasons, then the Assessing Officer has to put in extra efforts and make deeper enquiry on such reasons and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is time barred by 43 days. Petition for condonation of delay has been filed. We have heard both the sides and find that there is reasonable cause for delay in filing of the appeal on time. Hence we condone the delay and admit the appeal for hearing. 3. The assessee has raised the following grounds of appeal:- 1. On the facts and circumstances of the case the Ld. Pr.CIT-2, Kolkata erred in initiating proceedings u/s 263 of the Income Tax Act, 1961 (the Act) as there was no case of erroneous order and/or order prejudicial to the interest of revenue. All the facts were duly considered at the time of assessment made u/s 143(3) of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. Pr.CIT-2, Kolkata erred in passing the order u/s 263 of the Act which is contrary to the material on record and provisions of the Act, unjust and bad in law as follows:- a. On the facts and circumstances of the case and in law, the Ld. Pr.CIT-2, Kolkata erred in holding that Assessing Officer (A.O.) passed the order dated 28.04.2017 u/s 143(3) of the Act for impugned assessment year 2015-16 by giving contradictory observations/conclusions that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on examining the same found that the issue of short term capital loss at Rs.1,09,87,537/- from the sale of equity shares of six penny stock companies remained to be examined by the Assessing Officer and accordingly issued notice u/s 263 of the Act dt. 18/01/2019 and the same reads as follows:- Your case was selected for scrutiny under CASS on the reason Suspicious Sale transaction in shares and exempt Long term Capital Gains shown In return of income (Penny stock tab in ITS) . During the relevant F.Y. your company had invested in six penny stocks against which a short term capital loss of Rs. 1,09,87537/- was claimed. But during the assessment proceedings, the point was not taken into consideration by the Assessing Officer. The Directorate of Investigation, undertaken an Kolkata, had investigation regarding the accommodation entries of Long Term Capital an (LTCG), and was able to identity a number of beneficiaries who had together taken bogus entries of LTCG of huge amounts. This had led to the identification of Penny Stocks' which were used for generating such bogus LTCG. Various enquiries have been conducted by the Directorate of Investigation, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of short term capital loss as necessary details were filed. Further, it is submitted that, there is no tax impact arising due to these transactions since the assessee company had tax liability of Rs.8,49,027/- under the normal computation of total income whereas the tax paid under the minimum alternate tax was Rs.32,83,167/- and, therefore, since there is no tax impact, therefore the proceedings u/s 263 of the Act needs to be brought. However, the ld. Pr. CIT was not satisfied with these submissions and held the assessment order to be erroneous insofar as prejudicial to the interest to the revenue thereby setting aside the assessment order to be framed afresh after considering the following observations made in the impugned order. The relevant extract is reproduced hereunder:- I have carefully considered the facts of the case and gone through the submission of the assessee. The submission of the assessee company has already been discussed in the above Para 5, therefore, the same is not reproduced here again. On perusal of the assessment record, it is seen that, the case was selected for Scrutiny under CASS on the reason Suspicious Sale transaction in shares and claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Assessment Year 2015-16, order dt. 06/01/2020. Reliance was also placed on the decision of the Hon ble Supreme Court in the case of Sumathi Dayal reported in 214 ITR 801 (SC) and M/s. Durga Prasad More reported in 82 ITR 540. 5. Aggrieved the assessee is in appeal before this Tribunal. 6. The ld. Counsel for the assessee apart from referring to the details filed before the Assessing Officer during the course of assessment proceedings, as enumerated in the paper book containing 219 pages and also referring to another paper book containing 34 pages, asserted the fact that even if the alleged shortterm capital loss is disallowed there will be no prejudice to the revenue because the tax paid by the assessee under the minimum alternate tax shown in the income tax return will still be higher. Further referring to the probable computation of total income considering the disallowance of short-term capital loss, it was submitted that the income tax under the normal computation after disallowing the alleged short term capital loss would work out to Rs.26,66,108/- whereas the assessee has already paid the tax under the MAT at Rs.32,83,167/- and, therefore, even after disallowing the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pine Animation Ltd. 16,94,163 Rajlaxmi Industries Ltd. 20,47,227 TOTAL 1,09,87,537 9.1. The finding of the ld. Pr. CIT is confined to the facts that the ld. Assessing Officer has not carried out any examination nor has conducted any enquiry relevant to the said transactions giving rise to the short term capital loss of Rs. 1,09,87,537/-. The contention of the assessee is two-fold. Firstly that the Assessing Officer has examined all these details and secondly even if it is held that the said short term capital loss is disallowed treating it as bogus and earned from penny stock companies, the same will not be prejudicial to the interest of the revenue since even after disallowing the said short term capital loss, the tax paid by the assessee under Minimum Alternate Tax (MAT) is higher. 9.2. Now, as far as the first contention of the assessee that, the ld. Assessing Officer has examined the transactions, we find that the assessee s case was selected for scrutiny for three reasons of which one was Suspicious sale transaction in shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 11. Now as far as the second contention of the ld. Counsel for the assessee that there is no prejudice caused to the revenue, even if the short term capital loss is added back to the income of the assessee, we do not find any merit for the reason that carrying out the enquiry with relation to the transactions of short term capital loss will not end up only with regard to the said claim the ld. Assessing Officer during the course of examination of the sale consideration, purchases and sale, the parties who have sold such shares to the assessee may come across many other information which may be directly related to the assessee or may provide some credible information which the revenue authorities may use in case of other assessee s which can further help in collecting tax from other assessee s also. In our humble understanding, if the case is selected for scrutiny for specific reasons, then while framing the assessment order, the ld. Assessing Officer needs to discuss those particular reasons and should summarize the details called with regard to the issue, the information provided by the assessee and its final finding as to whether any addition is required to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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