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TMI Blog2024 (4) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as business transaction in return, not as capital gain. Respectfully, we rely on the order of Arvind Sahdeo Gupta [ 2023 (8) TMI 522 - BOMBAY HIGH COURT] for quashing of assessment order for wrong observation of the ld. AO. The Hon ble Bombay High Court in the case of PCIT vs. Ziauddin A Siddique [ 2022 (3) TMI 1437 - BOMBAY HIGH COURT] held that where (a) the transaction of purchase and sale of shares which is alleged to be a penny stock is done through Stock Exchange or through registered broker, the payments have been made through banking channel, STT is paid and the ld. Assessing officers has not criticised the documents and (b) assessee is not involved in price rigging, the transaction is genuine. - CIT(A) had made the enhancement u/s 68 - AR only challenged the addition of CIT(A). Though the addition of the Ld.AO is duly quashed, so the enhancement by the CIT(A) has no leg to stand, so the amount is duly deleted. DR was not able to produce any contrary orders against the submission of the AR. So, the appeal order is duly set aside. The addition made by the AO and enhancement by the CIT(A) are deleted. Decided in favour of assessee. - Shri Anikesh Banerjee, Judicial Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the action of the AO as also enhancing the addition under section 68 of the Act from a sum of Rs. 20,18,3487- to Rs. 62,03,535/- received on sale of equity shares of ACI Infocom Ltd Tilak Finance Ltd, alleged to be penny stocks, under section 68 of the Act read with section 115BBE. The reasons given are wrong, contrary to facts of the case and against the provision of law; 2.2. The CIT(A) erred in not only upholding the action of the AO but enhancing the addition under section 68 of the Act to Rs. 62,03,535/-, being the sale proceeds of sale of shares of a listed companies through recognized stock exchange as even when the nature and source of the said credit were explained and proved. The reasons given are in the realm of assumption and presumption upon which no addition is sustainable; 2.3. The AO / CIT(A) erred in law and facts in relying on certain data, findings of the general investigation in unrelated cases and third party statements. Neither do these material establish any connection with the case of the Appellant nor was Appellant given an opportunity to cross examine those parties / information; 2.4. The AO / CIT(A) failed to appreciate that nowhere do the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 4,89,840/- and the receipt of Rs. 15,28,508/- which is credited into the books of account of the assessee is also added in the total income of the assessee . So, the total amount of Rs. 20,18,348/- was added back to the total income of the assessee. Aggrieved assessee filed appeal before the CIT(A). The assessee has challenged before Ld.CIT(A) both the legal and merit. which are finally rejected. Being aggrieved by the order of Ld.CIT(A), assessee filed appeal before us. 4. The Ld.AR argued and filed a written submission, which are kept in the record. The Ld.AR invited our attention to assessment order page 38, para 6, which is reproduced as below: - 6. FINDINGS: 6.1 In the instant case, the assessee company, during FY 2013-14, incurred loss in trading in the following penny scrips and the quantum of loss incurred due to trading in the penny scrips during the FY 2013-14 was seen to have been recorded by the assessee in their accounts to the tune of the following: ACI Infocom Ltd Particulars Quantity Value Rs. Profit / Loss Rs. Opening Stock 1001100 51,64,867/- - Less: Sold on 11.06.2014 1000000 46,70,000/- (4,89,192/-) Less: Sold on 12.06.2014 1100 5027/- (648/-) Closing Stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt u/s. 10(38) or STCL/business loss, which meant that the assessee was required to pay no tax on LTCG or lesser tax liability on other income. 6.5 In the above mentioned background it is evident that the assessee company invested in the above said scrip during the FY 2014-15 without any business prudence in order to minimize its lax liability by using NSE/BSE platform by taking benefits of the loopholes of the existing laws in this regard. The assessee made huge investment in a non-viable company which is recognized as a Penny Stock Company. This defies all commercial and financial prudence and logic. On perusal of the assessment records of the assessee, it reveals that the assessee company, during FY 2014-15, incurred the following loss/profit with a view to avail the benefits of pre-arranged business Loss. ACI Infocom Ltd. Particulars Quantity Value Rs. Profit / Loss Rs. Opening Stock 1001100 51,64,867/- - Less : Sold on 11.06.2014 1000000 46,70,00/- (4,89,192/-) Less : Sold on 12.06.2014 1100 5027/- (648/-) Closing stock nil nil Total loss 4,89,840/- M/s Tilak Ventures Ltd (intraday trading) Particulars Quantity Value Rs. Profit / Loss Rs. Purchased on 20.11.2014 15,27,500 So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .71 on 26.07.2012 to Rs. 185.00 on 01.03.2013 and then fell back to Rs. 9.01 on 04.09.2015. Thus the claim of investment based on the market movement of such volatile scrip is totally irrational and beyond justification of any prudent business man. The claim thus not best on the market movement but based on the information from any other person like entry operators. Regarding the decision of investment into the share were taken by the directors but minutes book of the company did not reflect any such decision of the directors. In this regard, investigation report had stated that the assessee company was managed and controlled by well-known entry operator Vipul Vidur Bhatt. 6. The ld. AR further has invited our attention to the Recorded Reason of the ld.AO. The relevant paragraph is reproduced as below: - 3. The assesses is beneficiary of share transactions of M/s. AC I Infocom Ltd and Tilak Ventures Limited during year. In this regard, the Dy. Director of Income-tax (Investigation). Unit 8(2). Mumbai informed that the assessee has made sales Transactions of shares of these scrip of M/s. AC I Infocom Ltd and Tilak Ventures Limited for the value of Rs. 47,05,060/- and Rs. 15,27,500/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). It has been held that if the reasons for re-opening the assessment are based on incorrect facts or conclusions, the notice issued for re-opening cannot be sustained. A similar view has been taken in Punia Capital Pvt. Ltd. (supra) as well as in Ankita A. Choksey (supra). In paragraph 6 thereof, it has been observed that the reasons to believe that income chargeable to tax has escaped must be based on correct facts and if the facts as recorded in the reasons are not correct and the assessee points out the same in his objections then the order on objections must deal with the same and prima facie establish that the facts stated in its reasons as recorded are correct. If the Assessing Officer has proceeded on fundamentally wrong facts to form reasonable belief that income chargeable to tax has escaped assessment and the Assessing Officer while disposing of the objections does not deal with the factual position asserted by the petitioner, it would be safe to conclude that the Revenue does not dispute the facts stated by the petitioner. On such facts, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment. 8. He further r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted during the assessment proceedings. It is submitted that the aforesaid company M/s ACI Infocom Ltd is presently traded in BSE and meeting the SEBI Compliance. The appellant drew our attention to the submission furnished before the authorities below regarding the details of long term capital gain (APB, Pg.56) and the details of payment made through cheque at the time of purchase (APB, Pg.57). The appellant further referred to the copy of broker Nine Star Commodities (APB, Pgs.59 and 61) and broker note for purchase and sale of shares (APB, Pgs. 73 to 79). 9. The Ld.DR argued and fully relied on the order of the revenue authorities. 10. We heard the rival submissions and considered the documents available on the record. The assessee had made the transactions and generated loss through the transaction of scripts ACI and Tilak. The assessee s holding was more than 2 years. There is no such direct communication reflected in the order of the Ld.AO that the entire transaction was made a sham transaction. In the observation of recorded reasons, the Ld. AO mentioned that the transactions are undisclosed whereas during the assessment and appellate stages before the authorities were un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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