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TMI Blog2024 (11) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act, therefore the addition u/s 68 of the Act is at all unsustainable. Reopening of assessment - As we have observed above that in the case of South Yara Holdings [ 2019 (3) TMI 582 - BOMBAY HIGH COURT] has quashed the reopening of proceedings in the identical facts and circumstances, as involved in this case and therefore on that aspect as well, the impugned assessment made on the basis of the reasons recorded and the notice issued u/s 148 of the Act, is liable to be quashed. In cumulative effects, the addition on legal as well as on merits, is liable to be deleted, hence the same is deleted. In the result, the appeal filed by the Assessee stands allowed. - Shri Narender Kumar Choudhry, Judicial Member And Shri Girish Agrawal, Accountant Member For the Assessee : Shri Ravindra Poojari, A.R. For the Revenue : Shri H.M. Bhatt, Sr. D.R. ORDER PER : NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER: These cross appeals have been preferred by the Assessee and the Revenue against the order dated 26.12.2023, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO by issuing summons u/s 131 of the Act, recorded the statement of the Assessee on 10.12.2018 and examined the case and observed that the Assessee is engaged in construction business and is a partner in partnership firms M/s. DJS Enterprise and M/s. Unity Group, who were also engaged in construction business and during the assessment year under consideration, the Assessee had declared his income from business or profession, capital gain and income from other sources and also earned income from LTCG from the sale of listed securities M/s. Nivyah , which was claimed as exempt u/s 10(38) of the Act. 3.5 The AO though not contradicted the documents submitted such as purchase bills of shares, broker s note, DP statement, Demat account and bank account statement etc. submitted by the Assessee in order to substantiate his claim u/s 10(38) of the Act, however doubted the share transactions by considering the financials of the M/s. Nivyah and rigging of the shares and the information received from DDIT (Investigation), Mumbai, wherein the M/s. Nivyah has allegedly been posed as penny stock listed on BSE and used to facilitate introduction of unaccounted income in the form of exempt LTC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the last the judgment of the Hon ble Apex Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) AIR 2009, ultimately held the Assessee s income from the sales of shares of M/s. Nivyah as bogus and accommodation entry taken for the purposes of converting his own money into white and treated the same as unexplained cash credit u/s 68 of the Act and accordingly added the same to the total income of the Assessee u/s 68 of the Act. Further, the AO also by observing the famous saying that there is no such a thing as a free lunch , similarly no Assessee s beneficiary gets the advantage of bogus LTCG without any consideration in return, also added the amount of Rs. 15,53,373/- being 3% of Rs. 5,17,79,097/- the amount of LTCG and disallowed the same u/s 69C of the Act, as unexplained expenditure. 4. The Assessee, being aggrieved, not only challenged the aforesaid additions but also the reopening of the case u/s 147 of the Act by filing first appeal before the Ld. Commissioner, who not only affirmed the reopening of the case but also the addition of Rs. 5,17,79,097/- on the same footing of the AO, however deleted the addition of Rs. 15,53,373/-. Therefore, the Assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons for reopening of the Assessee s case u/s 147/148 of the Act. 7. Heard the parties and perused the material available on record and given thoughtful considerations to the rival contentions of the parties on this legal issue qua reopening of the case. For clarity and ready reference, the reasons recorded for initiation of reopening proceedings and issue of notice u/s 148 of the Act, reads as under: As per information available on record, during the year under consideration the assessee, an individual has filed return of income for A.Y. 2011-12 on 30.09.2011 declaring income of Rs. 21,07,350/-. The return of income was processed u/s. 143(1) of the Income-tax Act, 1961 on 08.01.2013. 2. Information has been received from Dy. Director of Income Tax (Inv.), Unit-8(3), Mumbai vide letter No. ADIT (Inv.)- 8(3)/Diss./Action/2017-18 dated 23.03.2018 that M/S. Nivyah Infrastructure Telecom Ltd. is a penny stock listed on BSE with script code (531568) and this company has been used to facilitate introduction of unaccounted income of member of beneficiaries in the form of exempt capital gain or Short Term Capital Loss in their books of accounts. It was noticed that share prices of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share and the prices are easy to manipulate through a number of entry/ exit providers. Hence, the earnings made from these are manipulated and shown as long term capital gains or short term capital loss in order to evade full or partial tax on income made through this means. On the other hand, long term capital gains or short term capital loss on share transactions carry tax exemption/ deduction benefits owing to which tax evaders find this way as lucrative one. The prices of penny stocks are artificially raised on stock exchanges to book bogus claims of long-term capital gains or short-term capital loss by various beneficiaries . The names of individual assessees were sorted out through extensive investigation. 7. In this case, no assessment was made and on the basis of enquiry on the information provided it is found that the assessee has not disclosed the true and correct income for the year under consideration as discussed above and the assessee was assessable under the Act. Accordingly, the provisions of clause (b) of Explanation 2 to section 147 are applicable to the facts of this case and the assessment year under consideration is deemed to be a case where income chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year under consideration. Therefore, as the impugned notice issued u/s 148 of the Act has not been issued by the AO on his own satisfaction that reason to believe that income chargeable to tax has escaped assessment, and thus the same is bad in law and consequently the impugned assessment made on the basis of the reasons recorded and the aforesaid notice issued u/s 148 of the Act, is liable to be quashed, as per dictum laid down in South Yara Holdings (supra) as reproduced below for completeness and ready reference 7. It is a settled position in law that re-opening of an assessment has to be done by an Assessing Officer on his own satisfaction. It is not open to an Assessing Officer issue a reopening notice at the dictate and/or satisfaction of some other authority. Therefore, on receipt of any information which suggests escapement of income, the Assessing Officer must examine the information in the context of the facts of the case and only on satisfaction leading to a reasonable belief that income chargeable to tax has escaped assessment, that re-opening notice is to be issued. 8. From the reasons, it is evident that the impugned notice has been issued on the basis of info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original assessment was completed u/s 143(3) of the Act, however, in the instant case, the return filed by the Assessee was processed u/s 143(1) of the Act. However, it is a fact that the Hon ble Jurisdictional High Court has dealt with the identical scrip, identical information of the investigation department, identical reasons recorded except variation in amounts and identical issue as raised in this case, hence, the dictum of the Hon ble Jurisdictional High Court would be squarely applicable to the instant case. 8. Coming to the merits of the case, we observe that the AO doubted the transaction carried out by the Assessee qua scrip of M/s. S.V. Electricals Ltd. mainly on the investigation report, financials of scrips and statement of various persons such as promoters, entry operators, exit providers/share brokers as recorded by the investigation wing, as well as the fact that there was sharp increase in the scrip and the Managing Director of scrip is on the run and the SEBI has passed certain orders against the scrip as well as the broker M/s. Monarch Networth Capital Ltd. and the Ld. D.R. therefore has submitted that the AO elaborately explained how the Assessee obtained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as exempt u/s 10(38) of the Act. 10.1 It is a fact that during the assessment proceedings, the AO by issuing the notice u/s 142(1) of the Act, show caused the Assessee to justify the transaction of LTCG. In response to which the Assessee vide letter dated 05.12.2018 submitted the relevant documents referred to above and tried to justify the LTCG transaction. It is also a fact that the AO neither controverted nor doubted the documents produced by the Assessee, which goes to show that the Assessee by submitting the relevant documents discharged his prima-facie onus cast upon him. However, the AO still doubted the transaction, on exterior facts vis- -vis information received from the Investigation Wing and the statement of various persons recorded by investigation wing, the financial status of the scrip company and preponderance of probability and the fact that the Managing Director of the scrip company is on run, mode of acquisition of shares and the action taken by the SEBI against the scrip company as well as broker M/s. Monarch Projects and Fin. Markets Ltd. qua irregularities. However, it is a fact that there were/is no allegations against the Assessee qua irregularities commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material relating to the assessee was found at any place where investigation was done by the Investigation Wing. The learned Commissioner (Appeals) relying on various orders of the Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidence filed by the assessee before the Assessing Officer. I do not find any adversity in the order of the learned Commissioner (Appeals) specifically keeping in view the fact that the Lucknow Benches in a number of cases after relying on the judgment of the hon'ble Delhi High Court in the case of Krishna Devi had allowed relief to various assessees. The concurrent findings of fact have been recorded by the first appellate authority and the Income-tax Appellate Tribunal. Thus, no substantial question of law is involved in the present appeal. The matter is concluded by findings of fact. For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed. Balbir Singh, Additional Solicitor General, (Raj Bahadur Yadav, Prahlad Singh, Samarvir Singh and Prashant Rawat, Advocates, with him) for the petitioner. 10.2 We further observe that the Hon ble Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron Steel (P.) Ltd. 2019 (103) taxmann.com 48 (SC). but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied Incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs. 10.4 Thus, summing up the case, as the Assessee has demonstrated the genuineness of its claim by producing the payment voucher of purchase of shares, contract notes, shares in physical mode, Demat statement, broker ledger, statement bill cum transaction and bank statement etc. and none of the persons whose statements have been relied on by the AO, have made any allegations against the Assessee. Even otherwise the AO has not granted any opportunity to cross-examine the witnesses whose statements were recorded by the investigation wing as relied on by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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