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TMI Blog2024 (12) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was sudden and steep rise in the price of shares when general market trend was admittedly recessive and that the Assessee had failed to provide explanation for steep rise in price of shares. We find no basis for the aforesaid observation made by the CIT(A) as the AO has not made any reference to quoted prices of the Shares. After referring to reasons recorded and the general modus operandi stated in the report of the investigation wing, the AO has added the sale consideration in the hands of the Assessee u/s 68 of the Act holding the same as unexplained income. The basic underlying facts that the Assessee has booked business loss in the case at hand has escaped the attention of the CIT(A) leading to incorrect factual observation and conclusion. Assessee appeal allowed. - Shri Narendra Kumar Billaiya, Accountant Member And Shri Rahul Chaudhary, Judicial Member For the Appellant/Assessee : Shri M. M. Golvala, Shri Darshit Naik For the Respondent/Department : Shri Rajesh Pardeshi ORDER PER RAHUL CHAUDHARY, JUDICIAL MEMBER: 1. By way of the present the Assessee has challenged the order, dated 25/04/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84,72,319/- was invalid and further erred in denying carry forward of the same. 3. The relevant facts in brief are that the Assessee filed original return of income for the Assessment Year 2012-2013 on 27/09/2012. It is stated that on account of mistake in relation to the valuation of closing stock, the Assessee obtained a revised tax audit report and filed a revised return on 30/10/2013. In the original return of income the Assessee had declared income of INR.7,31,540/- which was revised to net loss of INR.74,74,510/- [Business Loss of INR.84,72,319/- reduced by the Income from Other sources of INR.9,97,805/-] in the revised return. 3.1. The case of the Assessee was selected for regular scrutiny and Assessment under Section 143(3) of the Act was framed on the Assessee vide Assessment Order, dated 26/03/2015, accepting the returned income. 3.2. Subsequently, notice under Section 148 of the Act was issued to the Assessee on 31/03/2019 in initiating re-assessment proceeding under Section 147 of the Act on the basis of information received from the Deputy Director of Income Tax (Investigation) - Unit 7(1), Mumbai to the effect that the Assessee had traded in penny stock script of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock Broker [i.e., Bonanza portfolio Limited]. In response to notice issued under Section 133(6) of the Act by the then Assessing Officer during the original assessment proceedings, the aforesaid Stock Broker had confirmed the transaction and had furnished a copy of global report on trades undertaken by the Assessee. The Assessee had also filed copy of ledger accounts, bank statements and other documents during the assessment proceedings to support the genuineness of the purchase/sale transactions. Therefore, it was contended that primary facts and supporting evidence was disclosed by the Assessee during the original scrutiny assessment proceedings. After undertaking detailed verification, the then Assessing Officer had accepted the return filed by the Assessee and had passed Assessment Order, dated 26/03/2015, under Section 143(3) of the Act accepting the returned loss. There was no fresh tangible material available with the Assessing Officer to form belief that income had escaped assessment and that the reassessment proceedings were initiated on account of mere change of opinion. Without prejudice to the aforesaid, it was also contended that there was no live nexus or link between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding copy of return along with financial statements, tax audit report, details of bank accounts and bank statements or pass books. Thereafter, vide reply letter dated 04/09/2014, filed in response to the notice dated 22/08/2014, the Assessee had explained the nature of trading activity undertaken, and had filed a copy of Global Statement of trades issued by SEBI Registered Stock Broker [i.e., Bonanza Portfolio Ltd.] wherein in the share transactions under consideration were also reflected. Thereafter, vide letter dated 28/01/2015, the Assessee also filed copy of statement of Bonanza Portfolio Ltd for the relevant previous year for purchase and sale of shares, date-wise and settlement-wise. The Assessee also filed letter, dated 18/03/2015, furnishing the statement giving details of speculative profit/loss. It was communicated to the Assessing Officer that Bonanza Portfolio Ltd had responded to notice issued under Section 133(6) of the Act and a copy of their response was also placed on record. After examining the aforesaid information/details furnished by the Assessee during the regular assessment proceedings, the then Assessing Officer accepted the return filed by the Assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void paying due taxes on the income. Thus, the income element in respect of above transaction in penny stock script remains undisclosed and the same are required to be considered in computing total income of the assessee. In view of the above, and by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary thereto in his return of income. I have reasons to believe that the income to the extent of INR.19,59,104/- chargeable to tax in the hands of the assessee has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. A notice u/s. 147 r.w.s. 147 of the Income Tax Act, 1961. A notice u/s. 148 r.w.s. 147 of the Act, is being proposed to be issued to assesses such income and also any other income chargeable to tax which has escaped assessment, which comes to my notice subsequently in the course of assessment proceedings for A.Y.2011-12. (Emphasis Supplied) 5.4. We note that as per reasons recorded, the information from the investigation wing was received on 28/03/2019 and notice under Section 148 was issued on 31/03/2019. On reading of the reasons recorded for reopening the assessment as a whole, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 147 of the Act to conclude that the information was so imbedded in the material/document furnished by the Assessee that the same could not have been discovered by the Assessing Officer even after due diligence. Therefore, according to Assessing Officer, the disclosure by the Assessee cannot be regarded as true and full. We do not find any merit in the aforesaid stand taken by the Assessing Officer. The primary contention of the Assessee was that the Assessee was engaged in the business of trading had duly disclosed the transaction as well as loss arising there from in the financial statements, return of income and computation of income. While filing objections to re-opening of assessment vide letter dated 03/05/2019, the Assessee had specifically stated as aforesaid. However, the objections raised by the Assessee were rejected. We note that even in the Assessment Order, dated 25/12/2019, passed under Section 143(3) read with Section 147 of the Act, the Assessing Officer has proceeded on incorrect understanding that the Assessee has earned capital gains income. While recording the modus operandi in paragraph 6 of the aforesaid Assessment Order, dated 25/12/2019, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the inquiries conducted during the regular scrutiny assessment proceedings. The sole basis of initiating the reassessment proceedings and making addition in the hands of the Assessee is the fact that the Assessee had sold the shares of a company identified as a penny stock by the investigation wing. In our view, the approached adopted by the Assessing Officer cannot be countenanced. 5.7. Keeping view the aforesaid, we hold that in the facts and circumstances of the present case, neither the initiation of reassessment proceedings nor the addition made by the Assessing Officer on merits can be sustained. Accordingly, we quash the notice dated 31/03/2019, issued under Section 148 of the Act as well as the Assessment Order, dated 25/12/2019, passed under Section 143(3) read with Section 147 of the Act. Accordingly, the Assessment Order, dated 26/03/2015, passed under Section 143(3) of the Act is reinstated. Thus, Ground No. 1 to 7 raised by the Assessee are allowed and therefore, Ground No. 8 to 12 raised by the Assessee are dismissed as having been rendered infructuous. Our view is in line with and drawn strength from the judgments of the Hon ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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