9911796707
TMI Blog2024 (12) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... r erred in assuming jurisdiction under Section 147, when the jurisdictional conditions were not satisfied. 2. The Assessing Officer erred in assuming jurisdiction u/s 147, without having any 'reason to believe' that income has escaped assessment. 3. The Assessing Officer erred in assuming jurisdiction u/s 147, as the reassessment proceedings were initiated on the basis of change of opinion. 4. The Assessing officer erred in assuming jurisdiction u/s147, in the absence of tangible material. 5. The Assessing officer erred in assuming jurisdiction u/s 147 as in the present case there is neither any material available, nor any live link with the belief as per the reasons recorded. 6. The Appellant submits that both the lower authorities erred in fact and in law while making addition of Rs. 19,59,104/- u/s 68 of the Act by holding that the assessee had traded in shares of M/s. Scan Steels Limited which was a 'penny stock' as per information received from the Investigation Wing. 7. The Lower Authorities erred in invoking the provisions of Section 68 of the Act. 8. Without prejudice to Ground numbers 6 & 7, the Appellant submits that the addition cannot exceed Rs. 73,982/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee to disclose fully and truly all material facts. The Assessee filed Letter, dated 03/05/2019 before the Assessing Officer objecting to initiation of the reassessment proceeding. The Assessing Officer rejected the objections raised by the Assessee vide order, dated 16/05/2019. Thereafter, the Assessing Officer proceeded with the re-assessment proceedings, which culminated into passing of the Assessment Order, dated 25/12/2019, under Section 143(3) read with Section 147 of the Act, whereby the Assessing Officer made an addition of aforesaid amount of INR.19,59,104/- in the hands of the Assessee under Section 68 of the Act holding the same to be unexplained cash credit. 3.3. Being aggrieved the Assessee preferred appeal before the CIT(A) challenging the validity of the re-assessment proceedings as well as addition made by the Assessing Officer under Section 68 of the Act on merits. Before the CIT(A) it was contended on behalf of the Assessee that regular scrutiny assessment was framed on the Assessee under Section 143(3) of the Act and that there was no failure on the part of the Assessee to disclose truly and fully all material facts necessary for framing assessment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) disposed off the appeal as partly allowed. 4. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in paragraph 2 above. 5. We have heard both the sides and given thoughtful consideration to the rival submissions. We have also perused the orders passed by the authorities below and the material on record. 5.1. On perusal of the Profit & Loss Account for the relevant previous year we find that the Assessee had disclosed revenues from 'Sale of Shares' of INR.10,57,22,755/- and Net Loss from the Year as INR.84,72,319/-. As per the computation of income filed by the Assessee along with the revised return of income, the Assessee had disclosed business loss of INR 84,72,319/- out of which the Assessee had claimed carry forward of business loss of INR 74,74,514/- after setting off current year business loss with Income from Other Sources of INR.9,97,805/-. Thus, during the relevant previous year the Assessee had claimed to have incurred business loss of INR.73,982/- on account of sale of the Shares. Therefore, to this extent the averments made by the Assessee are factually correct. In the tax audit report, it has been clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TBA portal of department that NITA PADAMCHAND AGARWAL PAN AAIPA4389E has filed return of income for A.Y.2012-13 on 30/10/2013 declaring total income of Rs. (-)74,74,514/-. Brief details of information received by Assessing Officer - Information in the case of the assessee was received on official mail - id from O/o Dy. Director of Income-tax (Inv.), Unit 7(1), Mumbai on 28/03/2019 on official e-mail that during F.Y.2011-12, assessee has traded in Penny Stock Scrip M/s. Scan Steels Ltd. Trade during the F.Y.2011-12 is as under:- Beneficiary Name Beneficiary PAN Total Sale Value Scrip Name Nita Padamchand Agarwal AAIPA4389E 1959104 M/s.Scan Steel Ltd. It is also informed that in an enquiry made in the case of M/s Scan Steels Ltd. is a shell company and from analysis of financials of the company, it is established that the scrip My Scan Steels Ltd. is a penny scrip and has been used by operators/entry-exist providers to provide exempt LTCG/Short Term Capital Loss/Business Loss for the purpose of bringing uncounted cash in the books of accounts or to create fictitious losses to avoid paying due taxes on the income 3. Analysis of Information received - During the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come element' in the penny stock transactions under consideration had remained undisclosed. The aforesaid conclusion drawn by the Assessing Officer is factually incorrect. The Assessee had disclosed the loss suffered on account of Sale of Shares in the financial statements. Further, while recording the basis of forming belief in paragraph 4 of the reasons recorded, the Assessing Officer has recorded that income of INR.19,59,104/- has escaped assessment. It is admitted position that INR. 19,59,104/- is the consideration received by the Assessee from sale of the Share and not the profit element. Further, the Assessee had suffered business loss and therefore, the issue of any income element arising from the transaction remaining undisclosed does not arise. In our view, while forming the aforesaid belief the Assessing Officer has failed to consider the fact that the Assessee is engaged in the business of trading in shares and has not earned any exempt capital gains income from the sale transactions under consideration. Further, even if the aforesaid amount is considered to be income of the Assessee, the current year losses were sufficient to set off the said income. The Revenue has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation Wing. Therefore, the same would not apply to the facts of the present case. Further, even otherwise, in the present case purchase/sale of the Shares transactions took place through SEBI registered stock-broker on the floor of the stock-exchange and the same cannot be treated at par with preferential allotment made by a private limited company. We note that in paragraph 8.2 of the Assessment Order, dated 25/12/2019, passed under Section 143(3) read with Section 147 of the Act the Assessing Officer has again recorded as under: "8.2. From the above facts and analysis it is appears that the scrip M/s. Scan Steel Ltd. has been used to provide bogus Long Term Capital Gains to various beneficiaries. In view of the above, it is concluded that trading in penny stock of M/s. Scan Steels Ltd. during F.Y.2011-12 were pre-arranged method adopted by assessee to evade taxes and launder money." (Emphasis Supplied) 5.5. The above clearly shows that the Assessing Officer has proceeded on incorrect understating of facts. 5.6. We also note that the above Assessment Order, dated 25/12/2019, is silent about any inquiry/verification conducted by the Assessing Officer. The documents/details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 68 of the Act. However, the same have no application to the facts of the present case. The CIT(A) has also approved of the approach adopted by the Assessing Officer of drawing inference from proximate cause and surrounding circumstances without taking into consideration the relevant facts. The CIT(A) has noted that 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 Assessing Officer 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 Assessing Officer has added the sale consideration in the hands of the Assessee under Section 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. 6. In result, the present appeal preferred by the Assessee is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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