9911796707
TMI Blog2024 (11) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. Thus, the reopening is valid. As regards relates to the contention that prosecution in question was duly recorded in books of account cannot the sole criteria for quashing the reopening as the reopening u/s. 147 is invoked in respect of investigation report as well as the independent finding/reasons given by the AO in respect of escapement of income as per AO s belief. The contention of the ld. A.R. is that he was not given cross-examination of the persons whose statement was recorded and relied upon is also does not stand as the Assessing Officer issued the notice u/s. 148 and initiated proceedings u/s. 147 and given independent findings which was not wholly and solely based on the statements. The decisions in case of NDTV [ 2020 (4) TMI 133 - SUPREME COURT] , Calcutta Discount [ 1960 (11) TMI 8 - SUPREME COURT ] as well as Parshuram Potteries [ 1976 (11) TMI 1 - SUPREME COURT ] and Bombay Stock Exchange [ 2014 (6) TMI 444 - BOMBAY HIGH COURT ] will not be relevant in assessee s case as the reopening u/s. 147 was on the issue of trading in scrip of M/s. Radhe Developers India Ltd. which is more specific centric and cannot be said that the reopening was just a second opinion or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entially passing the assessment order despite the fact the same is based on change of opinion, is bad in law and without jurisdiction since the assessment had been reopened not only for the second time but is also based on borrowed satisfaction and on reasons which are based on general and vague material and information received from a third party and not on the basis of case specific material/evidence found in case of the appellant, the ld. CIT(A) ought to held the reassessment order as bad in law and void-ab-initio. 2. The ld. CIT(A) has erred in not appreciating the fact that the order passed by the AO disposing of the objections filed by the appellant company suffers from factual and legal infirmities and the observations therein are merely a repetition of observations in reasons recorded and the AO has not dealt with and/or controverted the basic and factual objections raised on merits of the issue and legal contentions raised by the appellant and hence it cannot be termed as a speaking order as envisaged by the Hon'ble Supreme Court in the case of GKN Driveshaft. Hence the re-assessment proceedings u/s 147 of the Act and impugned addition both are bad in law and requires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Radhe Developers India Ltd, and the resultant loss is genuine and has been carried out on screen based faceless digital platform Le, on a terminal in normal course of trading activity, through BSE/NSE and registered stock brokers, receipts/payments are through banking channels, shares are duly reflected in demat account, purchase and sale is at prevailing market rates and the STT and other Govt. levies on sale of shares have been duly paid. Thus, in absence of any contrary evidence brought on record by the AD to disprove the comprehensive evidences filed, the impugned addition of Rs. 2,94,763/- ought to have been deleted. 3. The appellant states that since it is not the case of the AO that the said alleged bogus transactions have been carried out in connivance with BSE and registered brokers and keeping in view the fact that BSE has also not treated the transactions in the said companies as bogus or sham and having also not classified them as penny stock companies, the impugned addition being based on mere surmises and conjectures, the id. CIT(A) ought to have held the same as wholly unjustified and bad in law. 4. The Id. CIT(A) has grievously erred in ignoring the fact that in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was again reopened u/s. 147 of the Act after due approval of the Pr. CIT and notice u/s. 148 of the Act was issued on 29-03-2018 which was duly served upon the assessee. In response to the said notice, the assessee filed his return of income on 23-04-2018 thereby declaring income same as original. The assessee vide letter dated 08-05- 2018 sought reasons recorded for reopening the assessment which was provided to the assessee vide letter dated 10-05-2018. Thereafter, notice u/s. 143(2) was issued on 10-05-2018 and served upon the assessee by speed post. Notice u/s. 142(1) r.w.s. 129 of the Act along with the detailed questionnaire was issued to the assessee on 06-09-2018. The assessee has not responded and therefore final assessment was given to the assessee vide notice u/s. 142(1) of the Act dated 25-10-2018. In response to the same, the assessee filed his objections based on reasons recorded for reopening furnished vide letter dated 28-11-2018. The show cause notice was issued to the assessee and the assessee was requested to furnish explanation by 14-12- 2018. The assessee was intimated through this show cause notice as to why the loss of Rs. 2,94,763/- should not be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Apex Court in case of GKN Driveshaft (India) Ltd. vs. UOI 259 ITR 19. Hence, the re-assessment proceedings u/s. 147 of the Act and impugned addition both are bad in law and requires to be quashed. The ld. A.R. further submitted that re-assessment order passed by the Assessing Officer was invalid and bad in law as the facts and figures mentioned in the reasons recorded for reopening are incorrect and contrary to the facts and since the transactions in question having been duly recorded in books of accounts. The assessee had furnished complete details regarding the share transactions of the company wise in M/s. Radhe Developers Ltd. during the course of assessment and in earlier re-assessment proceedings and hence the reopening of assessment for second time merely on the basis of some information received from a third party to the effect that the company i.e. M/s. Radhe Developers Ltd. is a penny stock being based on irrelevant analysis is nothing but mere change of opinion of borrowed satisfaction, which is not permissible in law. Thus, the impugned re-assessment order requires to be quashed ab-initio. The ld. A.R. submitted that the Assessing Officer fails to furnish the copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and no addition has been made. The ld. A.R. further submitted that the Assessing Officer in some cases have disallowed only the net loss incurred in trade of shares of M/s. Radhe Developers Ltd. and other companies while allowing profit earned from the same companies and in some cases have disallowed and added the entire purchase/sale value of shares of M/s. Radhe Developers Ltd. or other companies on identical facts and though of such companies were treated to be being stock companies. The ld. A.R. further submitted that such contrary and fluctuations stands in different case itself speaks of the manner in which the addition have been made and thus the impugned addition of Rs. 2,94,763/- in the instant case requires to be deleted on this count itself. The ld. A.R. relied upon the following decisions:- i) NDTV 271 taxman 1 (SC) ii) Calcutta Discount 41 ITR 191 (SC) iii) Bombay Stock Exchange 365 ITR 181 (Bom HC) iv) Parshuram Potteries 106 ITR 1 (SC) The ld. A.R. in respect of ground no. 1 related to reopening u/s. 147 relied upon the decision of NDTV 271 taxman 1 (SC), Calcutta Discount 41 ITR 191 (SC), Bombay Stock Exchange 365 ITR 181 Bom HC, Parshuram Potteries 106 ITR S (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that M/s. Radhe Developers Ltd. regularly changes its address which is not possible in normal circumstances and it shows that the company is trying to avoid disclosing correct address details. In view of the same, it is established from this M/s. Radhe Developers Ltd. is a share which floated in a market at close group and its price was also controlled by it. The share was being used to book artificial loss and gains to various beneficiaries. The balance sheet of the company was also not strong. Thus was just a shell company used as tool by a particular group floated in the market to carry out artificial price variations. From analysis of data received from BSE, it was found that the scrutinized trading were made, fluctuation in share price of company was not supported by financials of the company. On analysis the information, the Assessing Officer drew independent satisfaction that the income has escaped assessment in case of the assessee. Further, the assessee has not fully and truly disclosed the material facts necessary for his assessment for the year under consideration. Further, the Assessing Officer has discussed the applicability of the provisions of section 147/151(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate trading shares than the trading in scrip M/s. Radhe Developers Ltd.. Thus, reopening in this particular case cannot be held as change of opinion and the reopening u/s. 147 is valid. The contention of the ld. A.R. that the objections filed by the assessee company suffers from factual and legal infirmities also cannot be tenable as the Assessing Officer has given the independent finding in respect of trading in shares particularly that of M/s. Radhe Developers Ltd. Therefore, the decision of Hon ble Apex Court in case of NDTV (supra) is not applicable in assessee s case as though the assessee has disclosed the trading, it has not specifically given the details such as bifurcation of the scrip trading in respect of M/s. Radhe Developers Ltd. at the earlier reopening stage. Thus, the reopening is valid. As regards relates to the contention that prosecution in question was duly recorded in books of account cannot the sole criteria for quashing the reopening as the reopening u/s. 147 is invoked in respect of investigation report as well as the independent finding/reasons given by the Assessing Officer in respect of escapement of income as per Assessing Officer s belief. The contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIT(A) as well as before the Assessing Officer. From the perusal of these orders, it can be seen that the Assessing Officer as well as CIT(A) has not given any detailed finding as to whether the assessee has actively involved in the price manipulation during the assessment year 2011-12. The SEBI report as well as the suspension of the Bombay Stock Exchange is in the year 2015 giving the details of 2012. The involvement of assessee s transaction has not been specifically pointed out either in the assessment order or in the order of the CIT(A). Thus, on merit the disallowance made by the Assessing Officer does not sustain. Thus, ground no. 2 is allowed. 9. In the result, ITA No. 10/Ahd/2024 is partly allowed. Now coming to the ITA No. 11/Ahd/2024 (Vicky Rajesh Jhaveri) 10. The grounds of appeal are as under:- [1] Assessment order is bad in law and invalid, the same being based on change of opinion and having been passed without consideration of the objections/submissions filed disputing the validity of notice u/s. 148 and reassessment proceedings pursuant thereto. 1. The Id. CIT(A) has failed to appreciate that the AO had erred in law and on facts in reopening the assessment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to and relied upon in the reasons recorded, along with an opportunity of cross examination of such persons for initiating the proceedings u/s. 147 of the Act by issuing the notice u/s 148 of the Act. 6. The Id. CIT(A) ought to have appreciated that there is no failure on part of the appellant company to disclose fully and truly all material facts necessary for his assessment. In view of the above, the appellant company submits that both le notice issued u/s 148 of the Act as well as the impugned assessment order passed in pursuance of the said notice requires to be quashed. [II] Addition on account of disallowance of loss in trading of shares of Radhe Developers India Ltd. - Rs. 4,24,999/- 1. The Id. CIT(A) has erred in law and on facts in confirming the addition of Rs. 4,24,999/- on account of disallowance of loss in trading of shares of Radhe Developers India Ltd. merely on surmises and conjectures based on various allegations/observations which are not only contrary to facts of the case but are highly irrelevant as well as HYPOTHETICAL based on technical study and analysis which is further based on surmises, presumptions and assumptions. 2. The Id. CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions have been made and thus the impugned addition of Rs. 4,24,999/- in the instant case requires to be deleted on this ground itself. In view of the above, the addition of Rs. 4,24,999/- being loss incurred in trading of shares of Radhe Developers Ltd. is required to be deleted. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds and to submit additional grounds at the time of hearing of the appeal. 11. There is a delay of 54 days in filing the present appeal for which the assessee has filed the condonation of delay stating the reasons as stated in ITA No. 10/Ahd/2024 and the delay is condoned. Though the factual aspects are almost identical, still the facts of the case is that the original return of income was filed on 30-07-2021 declaring income of Rs. 63,17,600/-. The return was duly processed u/s. 143(1) of the Act, 1961. The case was reopened on 25-03-2025 u/s. 147 of the Act which was finalized on 19-10- 2016 thereby assessing the income at Rs. 3,49,96,787/-. Thereafter, the case was again reopened u/s. 147 of the Act after due approval of Pr. CIT and a notice u/s. 148 of the Act issued on 29-03-2018 which was duly served upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. I (1 to 6) is dismissed. Second ground II (1 to 6) here also the Assessing Officer has not doubted the purchase and even not demonstrated whether the assessee was actively involved in price manipulation of the scrip of M/s. Radhe Developers (India) Ltd. There is no nexus pointed out by the Assessing Officer in the assessment order as well as by the CIT(A) in the order. Thus, ITA No. 11/Ahd/2014 is partly allowed. Now coming to the ITA No. 12/Ahd/2024 (Vicky Rajesh Jhaveri) 14. The grounds of appeal are as under:- (I) Assessment order is bad in law and invalid, the same being based on change of opinion and having been passed without consideration of the objections/submissions filed disputing the validity of notice u/s.148 and reassessment proceedings pursuant thereto. 1 The ld. CIT(A) has failed to appreciate that the AO had erred in law and on facts in reopening the assessment and consequentially passing the assessment order despite the fact the same is based on change of opinion, is bad in law and without jurisdiction since the assessment had been reopened on the basis of borrowed satisfaction and on reasons which are based on general and vague material and information received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, the appellant company submits that both notice u/s 148 of the Act as well as the impugned assessment order passed in pursuance of the said notice requires to be quashed. [II] Addition on account of disallowance of purchase consideration of shares Gujarat Meditech Ltd. - Rs. 50,73,595/ 1. The ld. CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 50,73,695) made by the AD being the purchase value of shares of Gujarat Meditech Ltd, merely on surmises and conjectures as well as without verification of facts by mechanically relying upon the various findings, allegations and observations in the Information received from a third party. In view of facts, submission and evidences fled and more particularly the fact that the appellant is engaged in the business of trading in shares the impugned addition of Rs. 50,73,695-requires to be deleted. 2. The ld. CIT(A) has erred in not considering and appreciating the fact that the trading in shares of Gujarat Meditech Ltd. and the resultant profit/loss is genuine and has been carried out on screen based faceless digital platform Le, on a terminal in normal course of trading activity, through BSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide the complete details/material/evidences including the information/data collected from BSE, evidence in support of approval obtained u/s.151 of the Act as well as statements recorded, if any, along with an opportunity of their cross examination as referred to and relied upon in the reasons recorded and the assessment order for making the impugned addition of Rs. 50,73,695/-. In view of the above, the addition of Rs. 50,73,695/- being the purchase value of shares of Gujarat Meditech Ltd. is required to be deleted. [III] Notional Addition on account of commission allegedly paid on purchase consideration of shares of Gujarat Meditech Ltd. amounting to Rs. 50.73.695/- 0.25%- Rs. 12,684/- 1.The Id. CIT(A) has grievously erred in law and on facts in confirming addition of Rs. 12,604 made by the AO being commission allegedly paid on purchase consideration of shares of Gujarat Meditech Ltd. amounting to Rs. 50,73,695/- (wrongly stated to be loss in the assessment order] merely on surmises, conjectures and assumptions. In view of facts and elaborate contentions raised in Ground of Appeal No. II hereinabove, since the addition self being on wrong premises and assumptions and liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer observed that the said Shri Jignesh Shah admitted in his statement on oath u/s. 131 that he had facility of accommodation entry for long term capital gains though Sanjay Shah and Tushar Shah. The Assessing Officer observed that the assessee has entered into transactions with Gujarat Meditate Ltd. which is a penny stock having no definite activity and assessee has been beneficiary of accommodation entries from transaction of shares. After taking cognizance of the details, the Assessing Officer observed that the total trade volume in shares of Gujarat Meditate Ltd. on 05-11-2011 and 06-1-2011 was 1,21,000 and 96000 respectively. The Assessing Officer issued show cause notice dated 07-11-2019 calling upon the sale of share of Gujarat Meditech whether should be considered an arranged transaction to bogus loss or not. The assessee filed its reply/submissions and after taking into consideration the same, the Assessing Officer made addition of Rs. 50,73,695/- in respect of assessee s claim of loss relating to transactions of sale of scrip i.e. Gujarat Meditate Ltd. and claiming loss. The Assessing Officer also made addition of Rs. 12684/- being the commission paid by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reen based faceless etc. plateform through BSE/NSE and with registered stock broker and the assessee has paid security transaction tax (STT) while purchasing and selling the said shares. The assessment order passed by the earlier Assessing Officer in earlier and subsequent years u/s. 143(3), the trading in shares of Gujarat Meditech Pvt. Ltd. and result profit/loss has been accepted by the Department. 21. The ld. D.R. submitted that the purchase was disallowed in the present case and in fact the purchase was doubted by the Assessing Officer. The assessee has not demonstrated the difference of second in the buy order time, sale order time in these particular shares. The ld. D.R. filed the following written submission:- 1. As noted by the Assessing Officer in his assessment order the information was received from Investigation wing. Ahmedabad that search action w/s 132 was conducted in the case of Shri Jignesh Shah, an accommodation entry provider of Ahmedabad it was found during investigation that Shri Jignesh Shah is managing and controlling multiple companies and concerns which are not carrying out any business activity. 2. These concerns are involved into activity of providing ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount Same was accepted without scrutiny and an assessment order was passed An information was received from DDIT (Investigation) that during search conducted upon one JS it was found that he was director in several companies which were actually shell companies not in existence and were engaged in providing bogus accommodation entries regarding long term capital gain on sale of shares and assessee had also sold shares of such company held by and impugned exemption long term capital gain claimed by it was bogus. On basis of same Assessing Officer had issued a reopening notice against assessee it was noted that subsequent information on basis of which Assessing Officer acquired reasons to believe that income chargeable to lax had escaped assessment on account of omission of assessee to make a full and true disclosure of primary facts was relevant reliable and specific it was not at all vague or non specific it was not a case of mere change of opinion or drawing of a different inference from same facts as were earlier available but Assessing Officer was acting on fresh fomaton, Further since transaction itself on basis of subsequent information was found to be a bogus transaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares since these companies have no financial backing to support their Cyclic rice and fall of price. In this case also it is seen that majority of transactions on date of sale of shares were carried by the assessee and his Associates. It may also be noted that the AR of the SSC argued that in few instances sale order was made 4 hours prior to buy order time however as mentioned above General public does not make trade in these shares therefore sale order can be placed at any time since no one but entities arranged by entry provider will make buy order. Further it is seen from time data analysis that in the case purchasing entity bought shares within a span of 2 minutes by placing around 20 orders. 5. Further the financials of the purchaser companies were also analysed from their ITR Med From the same it is seen that both the companies were having huge losses in their books and the act of investment in shares of a company having poor fundamentals is against the prudent behaviour of an investor/business entity. Thus it was established that the assessee has traded in shares of penny scrip to book bogus loss. Even the SEBI has passed adverse orders against this company. There are se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income at all defined in section 147 of the Act which is a condition precedent for issuing notice u/s.148 of the Act, the CIT(A) ought to held the reassessment order as bad in law and void-ab-initio. 2. The ld. CIT(A) grievously erred in not considering the fact that the AO has not disposed off the elaborate objections disputing the validity of notice u/s. 148 and reassessment proceedings pursuant thereto based on the reasons recorded. That since the AO has failed to dispose of the objections filed by the appellant by passing a speaking order, which he was mandatory bound to do so prior to proceeding with the case on merit as held by various courts of law, the re-assessment in dispute requires to be quashed as void-ab-initio on this ground itself. 3. The ld. CTA) further failed to appreciate the fact that the reassessment order passed by the AO was invalid and bad in law in as much as the facts and figures mentioned in the reasons recorded for reopening are incorrect and contrary to facts and since the transaction in question having been duly recorded in books of account. 4.The Id. CITA) has erred in not considering the fact the Assessing Officer has failed to furnish the cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assified them as penny stock companies the impugned addition being based on mere surmises and conjectures, the ld. CIT(A) to have held the same as wholly unjustified and bad in law. 4. The ld. CIT(A) has grievously erred in ignoring the fact that in assessment orders passed u/s.143(3) of the Act in earlier and subsequent years, including the assessment order passed by the earlier AO u/s.143(3) of the Act, the trading in shares of Gujarat Meditech Ltd. and the resultant profit/loss has been accepted and no addition has been made. 5. The Id. CIT(A) has grievously erred in not appreciating the fact that the reopening of the assessment by the AO is on different stands to the convenience of the department as evident from the reasons recorded in case of various members of the appellant's family/group concerns. The AO in some cases have disallowed only the net loss incurred in trading of shares of Gujarat Meditech Ltd. and other companies while allowing profit earned from the same companies and in some cases have disallowed and added the entire purchase/sale value of shares of Gujarat Meditech Ltd. or other companies on identical facts and though all such companies were treated/allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income on 26-04- 2019 declaring total income at Rs. 65,96,960/-. Copy of reasons recorded for reopening of the assessment for A.Y. 2012-13 was provided to the assessee on 03-05-2019 and objections to the said reasons were filed by the assessee on 15-11-2019 and 22-11-2019 which was duly disposed of vide order dated 24-12-2019. Notice u/s. 274 r.w.s. 271(1)(b) of the Act dated 09-10-2019 was issued to the assessee as the assessee has not complied with notice u/s. 143(2) dated 14- 09-2019. In this case, the assessee entered into transactions with Gujarat Meditech Ltd. which is a penny stock company as observed by the A.O. The Assessing Officer made addition of Rs. 25,66,440/- towards transactions related to the scrip Gujarat Meditech Ltd. and disallowed the loss. The Assessing Officer also made addition of Rs. 6466/- being the commission paid by the assessee @ 0.25% of the loss of Rs. 25,86,440/-. The ld. A.R. submitted that this case is identical to that of Vicky Rajesh Jhaveri (ITA 12/Ahd/2024). 26. The ld. D.R. also submitted that this case is identical to that of ITA No. 12/Ahd/2024. 27. We have heard both the parties and perused all the materials available on record. The lega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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