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TMI Blog2024 (9) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... d the inquiries have revealed that the said shares of said company were manipulated to generate bogus long term capital gains/los. It was all the more incumbent on the Assessing Officer to have made detailed inquiry into the matter to unravel the truth and see what is behind the smoke screen, but the Assessing Officer has merely accepted the contentions of the assessee based upon contract notes and the bank statement submitted by the assessee. Thus, the Assessing Officer has made a superficial inquiry and has not made proper inquiry as required in the facts and circumstances of the case. PCIT rightly set aside the reassessment order passed by the AO with the directions to the Assessing Officer to pass fresh order in accordance with law after duly examining the facts of the case as discussed by ld. PCIT in its revisionary order, and after giving reasonable opportunity of being heard to the assessee. Appeal of the assessee is dismissed. - Shri Ramit Kochar, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Bharat R. Popat, A.R. For the Revenue : Shri Kamlesh Makwana, CIT-D.R. ORDER PER : RAMIT KOCHAR, ACCOUNTANT MEMBER:- This appeal in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 263 dated 14th Feb, 2024 was issued by the ld. PCIT to the assessee requiring the assessee to show cause as to why the reassessment order u/s. 147 r.w.s. 144B of the Act dated 30th March, 2022, should not be revised within the provisions of section 263 of the Act. The said show cause notice is reproduced hereunder:- M/s/Ms/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT-1961-Assessment Year 2014-15. In this regard, a hearing in the matter is fixed on 22/02/2024 at 03:00 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal the link: incometaxindiaefiling.gov.in Please refer to the assessment order passed u/s 147 r.w.s 144B of the Income-tax Act, 1961 ( Act ) for AY 2014-15, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act dtd. 30.03.2022, without proper verification of the facts/details stated in the information and reasons for reopening the case. As such, the order passed u/s 147 r.w.s. 1448 of the Act dtd. 24.03.2022 is erroneous and prejudicial to the interest of revenue. 9. Since the above issues were not verified while finalizing the assessment order, the assessment order passed is erroneous in so far as prejudicial to the interest of revenue. Therefore, action u/s 263 of the Act is proposed in this case. In case you have any objection to the action proposed or desire to offer your explanation/comments in this regard, you are requested to furnish your reply on the proposed action by 22.02.2024 through e-filing portal using the link: incometaxindiaefiling.gov.in. However, it is clarified that personal appearance is not required and furnishing of uploaded submission, complete in all respect along with necessary evidences, shall be treated as sufficient compliance. The assessee in response submitted that the reassessment order of the Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. The assessee submitted that assessee had made investment of Rs. 12,61,190/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted demat account in which the shares were credited. The AO merely relied on the ledger account and contract notes furnished by the assessee, and re-assessment was completed u/s. 147 r.w.s. 144B vide order dated 30th March, 2022 without proper verification of facts/details stated in the information and reasons for reopening the case. It was observed by ld. PCIT that the reassessment order passed by the Assessing Officer under Section 147 r.w.s. 144B on 30th March, 2022 is erroneous and prejudicial to the interest of revenue, and the said reassessment order was set aside by the ld. PCIT vide revisionary order dated 12.03.2024 passed by ld. PCIT u/s 263, and the Assessing Officer was directed to verify the demat account and pass fresh assessment after considering the judgment of Hon ble Supreme Court in the case of Suman Poddar v. ITO (2019) 112 taxmann.com 330 (SC) . Thereafter, the ld. PCIT refers to the provisions of Section 263 read with Explanation 2 to section 263, and the various case laws, and thereafter, he came to the conclusion that Assessing Officer has erred in not verifying the issue of long term capital gain of Rs. 79,43,000/- from the penny stock KDJHRL as the AO di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s statement of Shri Vinod Deora(the director of the KDJHRL) recorded on 18.04.2018 and 19.04.2018, during survey u/s 133A, and the same is placed in paper book /page nos. 28 to 42. Our attention was drawn to the page no. 27/PB where there is a report of DDIT Investigation Unit 4(3) Mumbai, wherein it is stated there was various beneficiaries who have traded in the shares of KDJHRL, and the said company is a recognized penny stock engaged in providing bogus long term gains/losses to various entities. Our attention was also drawn to page no. 43- 51/PB wherein reply filed by the assessee during the course of reassessment proceedings is placed on record. Our attention was also drawn to page no. 48 to 51/PB wherein the contracts note are placed w.r.t. trading in scrip of KDJHRL(formerly known as Gomti Finlease(India) Limited). Our attention was drawn to the page no. 52/PB of the page book wherein bank statement of the Axis Bank is placed from where payment of Rs. 12 lakhs was made for purchase of shares of KDJHRL. Our attention was drawn to page nos. 53 to 55/PB wherein the ledger account of the assessee with Prabhudas Lilladhar Private Limited are placed from 19-03-2012 to 31-03-2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndigarh decision in the case of Trivikram Singh Toor v. PCIT , reported in (2022) 142 taxmann.com 493(Chd.Trib). 4.2 It was submitted by ld. CIT- DR that during the course of re-assessment proceedings, the AO did not asked for details of demat account and genuineness of the transactions. There is no independent inquiry conducted by the Assessing Officer, and reassessment order passed by the AO was erroneous and prejudicial to the interest of revenue, as the share dealt with by the assessee was a penny stock and the Assessing Officer was to make inquiry which he failed to do so. It was submitted that the demat account is the primary account and the ld. PCIT directed to verify and make inquiry. It was submitted that if the AO failed to make inquiry as he was required to make keeping in view facts and circumstances, then the ld. PCIT can invoke revisionary powers u/s 263. Our attention was drawn to Explanation 2 to Section 263. 4.3 The ld. counsel for the assessee submitted in rejoinder that the assessee is not aware of the business transactions carried on by KDJHRL, and the assessee is now aware of state of affairs of KDJHRL as the assessee is only an small investor in the said compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The assessee also submitted Balance Sheet for the year ending 31.03.2012 and 31.03.2013. Supporting documents were also submitted by the assessee to substantiate the sale of 18,400 shares of KDJHRL on the platform of BSE for an aggregate sum of Rs. 79,43,000/- which also included STT paid on the sale of said shares. The 18400 shares were sold in financial year 2013- 14, after being held for 18 months. Admittedly shares were traded on recognized Stock Exchange-BSE, STT was paid on sale of shares and these shares were held for more than 12 months, and thus, the assessee earned long term capital gains to the tune of Rs. 67,46,810/- which was disclosed in the return of income filed for the impugned assessment year and claimed as an exempt income u/s 10(38). The AO accepted the contentions of the assessee, and vide reassessment framed by the AO, the returned income was accepted. The ld. PCIT invoked revisionary proceedings u/s 263 as the AO has not made requisite inquiries/examination as were required to be made under the facts and circumstances and also keeping in view the decision of Hon ble Supreme Court in the case of Suman Poddar(supra) and other decisions, and also keeping i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then to Rs. 99.2 in December, 2013(PB/Page 34). The Director of KDJHRL Mr. Vinod Deora stated in the two statements on oath recorded during Survey on 17.04.2018 to 19.04.2018 that he is not aware why there was an astronomical rise in share price. He stated that there are meager profits/losses in the company through out. He also admitted that rise in price is not in accordance with the financial condition of the company. With these evidences in possession of the Revenue which were also duly made available to the assessee during the course of reassessment proceedings, the Revenue has discharged its onus, and now the onus shifts to the assessee to rebut the contention of the Revenue that the said share KDJHRL is penny stock and manipulations in the share price has taken place to generate bogus long term capital gains/loss, and now the onus is on the assessee to demonstrate/prove that the transactions in the shares of KDJHRL carried on by the assessee were genuine transactions and the assessee had not dealt with the penny stock and was not beneficiary of bogus long term capital gain. It is also pertinent to mention that the assessee only dealt with the shares of KDJHRL, and wrt other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puters valued at Rs. 14,85,826/-(question no. 35 of statement /page 40/PB). The statements of the exit providers were also recorded who dealt in the shares of KDJHRL, and they confirmed that the company does not have any business, it was a paper company which provided accommodation entry. The name of the assessee also appeared in the investigation report conducted by Revenue, wherein the assessee is listed as one of the beneficiaries of bogus long term capital gains earned on sale of KDJHRL. The share price of KDJHRL rose from below Rs. 1 in June 2010 to above Rs. 10 in January 2012 and then to Rs. 99.2 in December, 2013(PB/Page 34).Thus, the AO ought to have made proper enquiries keeping in view facts and circumstance. Reference is drawn to the judgment and order of Hon ble Supreme Court in the case of Suman Poddar(supra) ; judgment and order of Hon ble Calcutta High Court in the case of PCIT v. Swati Bajaj , ITA No. 06 of 2022, dated 14.06.2022.; judgment and order of Hon ble Supreme Court in the case of Sumati Dyal v. CIT 214 ITR 801. The ld. PCIT rightly invoked provisions of section 263 on the ground that the Assessing Officer while accepting the returned income during the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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