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TMI Blog2024 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order passed under Section 148A (d) of the Act indicates that the AO had any books of account or documents or evidence, which would reveal that the petitioner s income chargeable to tax, reflected as capital gains from the transactions in Cubical, had escaped assessment in the relevant AY 2013-14. As noted above, the impugned notice merely alleges that the assessee had taken bogus profits through the scrips of Cubical to the tune of Rs. 30,71,263/- which is a penny stock during the financial year 2012-13 . However, there was no material to suggest that any profit from sale and purchase of the said shares was made or had escaped assessment. The report annexed with the impugned notice dated 25.05.2022 was only related to Gemstone and it did not mention about Cubical. AO had also furnished a tabular statement which reflected the transactions entered by the petitioner in the financial year 2012-13. The third row of the said tabular statement in the impugned order mentions the value of the opening quantity, the value at which the quantity was bought, the sale quantity, and the value which resulted in the profit of Rs. 30,71,263/-. The said tabular statement did not mention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. The petitioner s challenge to the impugned notices and the impugned order is founded on the basis that the Assessing Officer (AO) had no information to suggest that the petitioner s income for the relevant AY 2013-14, in excess of Rs. 50,00,000/-, had escaped assessment. 3. The AO had briefly set out the information, which according to the AO suggested that the assessee s income to the extent of Rs. 60,46,263/- for the AY 2013-14, had escaped assessment. The relevant extract of the impugned order which refers to the information as available with the AO is reproduced below: 2.1 The tabular form and description of information in present case are as below: S.No. FY Information Source Description Value in Rupees 1 2012-13 13 Investigation wing, Mumbai Sale of shares 29,75,000/- 2 Fictitious Profits in Equity/ Derivative Trading 30,71,263/- TOTAL 60,46,263/- 2.2 This information was uploaded on Insight portal. As per the information received from Unit-5(2) of Investigation Wing, Mumbai in an ongoing enquiry in the case of Gemstone Investment Ltd., it was found that the said company has been put under Graded Surveillance Measure (GSM) framework and in the investigating period Securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of two items. First, the shares of M/s Gemstone Investment Ltd. (hereafter also referred to as Gemstone in short) were sold for a total consideration of Rs. 29,75,000/-; and second, the shares of M/s Cubical Financial Services Ltd. (hereafter also referred to as Cubical in short) were sold resulting in income to the extent of Rs. 30,71,263/-. 5. The impugned notice dated 25.05.2022 was also accompanied by an annexure, which included a report in respect of Gemstone. The said report indicated that Gemstone had been put under Graded Surveillance Measure (GSM framework) and Securities and Exchange Board of India (SEBI) had passed the orders banning trading in the said script. During the period of five AY s spanning from the AY 2010-11 to 2014- 15, the said company had returned income ranging from Rs. 29,27,660/- in the AY 2014-15 to Rs. 73,06,160/- in the AY 2012-13. The financials of the company did not indicate any substantial increase. The analysis of the share price of Gemstone indicated very wide fluctuations. It had moved from Rs. 98/- per share in May, 2009 to Rs. 202/- per share in July, 2010 and thereafter, it had fallen to Rs. 6/- per share in March, 2011 and the cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r information which suggested otherwise. 9. The AO had passed the impugned order under which substantially reiterated the contents of the impugned notice dated 25.05.2022. The AO rejected the petitioner s contention that he did not have any material for invoking the extended period of limitation under Section 149 (1) (b) (i) of the Act. The AO held that the word evidence would also cover circumstantial evidence. The AO held that the scrips in which the petitioner had traded were proven to be penny stocks and the assessee had claimed exempt income in respect of long-term capital gains under Section 10 (38) of the Act to the extent of Rs. 50,36,186/- and as per the information available, the same was believed to be unaccounted income of the assessee, which had not been offered to tax. 10. We have heard the counsel for the parties. 11. It is relevant to note that the petitioner had filed his income tax return for the AY 2013-14 on 31.07.2013. The AO had issued a notice dated 30.06.2021 under Section 148 of the Act. After receipt of the said notice, the petitioner sent a letter dated 29.01.2022, seeking reasons to believe that his income had escaped assessment and reopening the reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to him to file reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer as provided in clause (b) of new section 148A of the Act. After receiving the reply, the Assessing Officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act. The Assessing Officer is required to pass an order under clause (d) of section I48A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by him from the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which time or extended time allowed to furnish a reply expires. If it is a fit case to issue a notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where, (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that in terms of the instructions (Instruction No. 01/2022 dated 11.05.2022), notices under Section 148 of the Act in respect of the AYs 2013-14, 2014-15 and 2015-16 were not to be issued, if the income escaping assessment of the aforesaid years is or likely to amount less than Rs. 50,00,000/-. Paragraph 7 of the said instruction is set out below: 7. Cases where the Assessing Officer is required to provide the information and material relied upon within 30 days: 7.1 Hon ble Supreme Court has directed that information and material is required to be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for AY 2013-14, AY 2014-15 and AY 2015- 16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of assessees, it is clarified that information and material may not be provided in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated from the shares was bogus or a camouflage to reflect the undisclosed income as long term capital gains. 21. The impugned order also does not reflect any material that would suggest that the assessee s income in respect of the transactions in Cubical, had escaped assessment. The AO has merely mentioned Cubical as a penny stock. However, the fact that a stock is a penny stock (a stock of low value), absent of any other material or information led to the conclusion that the transaction in the said stock is not genuine or a subterfuge to bring the undisclosed income as capital gains in the books of account. 22. Mr. Chawla, the learned counsel appearing for the Revenue had also fairly stated that apart from one tabular statement, there was no other material on record on the basis of which the AO could suspect that the income reflected as the transactions, had escaped assessment. 23. In absence of any material or evidence with the AO at the material time to suggest that the transactions in Cubical were bogus transactions, the amount of Rs. 30,71,263/- relating to the transactions in Cubical could not be included in the amount suggested having escaped assessment. If the said amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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