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Income Tax Appellate Tribunal, GAUHATI BENCH
Before: SHRI RAJPAL YADAV & SHRI GIRISH AGRAWAL
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: Appeal filed by the revenue is against the order of Ld. CIT(A), Shillong dated 18.09.2020 passed against the assessment order of ITO, ward-3, Shillong u/s. 147/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 27.12.2019 for AY 2016-17.
Grounds raised by the revenue are on the solitary issue relating to addition of Rs.3,57,490/- towards long term capital gain added u/s. 69A arising out of dealing in bogus penny stock.
From the order sheet entries, we not that no one has represented the assessee before the Tribunal in the past as well as today except for one day where the assessee himself appeared and sought adjournment.
Before us, Ld. Sr. DR contended that though the tax effect in the present appeal is of Rs.1,73,794/- only but is covered by the exception to the monetary limits for filing of appeals by the revenue, referred in Circular No. 23 of 2019 dated 06.09.2019 issued by Central Board of Direct Taxes (CBDT).
Brief facts of the case are that assessee filed his return of income on 26.07.2017, reporting total income of Rs.3,29,070/- . In the return filed by the assessee, following incomes were reported as noted by the Ld. AO in his assessment order:
Salary/Pension Rs. 5,67,270/- Income from House Property Rs. (-)88,200/- Gross total Income Rs. 4,79,070/- Deduction under Chapter VIA Rs. 1,50,000/- Total Income Rs. 3,29,070/-
Ld. AO noted, “it is ascertained that during the financial year 2015-16 had made accommodation entry of bogus long term capital gains in the form of penny stock by way of trading in the scrips of M/s. Golden Bull Research & Growth Limited, Regency Trust Limited and Global Capital Markets Limited and has received bogus LTCG of Rs.3,57,490/- as a beneficiary. In view of the above facts and circumstances “by reasons of the failure on the part of the assessee to disclose fully and truly on the materials facts” in the return of income, filed on 26.07.2017, income of Rs.3,57,490/- is chargeable to tax and has escaped assessment during the assessment year 2016-17 and accordingly notice under section 148 was issued on 25.03.2019 and sent by Speed Post No. EE41579902IN on 25.03.2019 to the assessee for reassessment of income during the FY 2015-16 relevant to the AY 2016-17.”
Assessee did not file any return in response to notice u/s. 148 issued by the Ld. AO. Ld. AO thereafter, called for information by issuing notices u/s. 133(6) of the Act to National Stock Exchange of India Ltd. (NSE), Mumbai as well as Bombay Stock Exchange (BSE). Ld. AO received a response from NSE stating “the mentioned scrip of M/s. Golden Bull Research & Growth Ltd., Regency Trust Ltd. and Global Capital Markets Ltd. have never been listed on National National Stock Exchange. In view of the same, no details pertaining to the said scrips like condition for listing, date of listing or delisting, value as on date of listing, names of promoters, share holding pattern, corporate actions, suspension of trading activity, any regulatory action taken against company etc. I are neither found nor recorded. The letter from NSE further states that no transactions details are found during the period from April 1, 2015 to March 31, 2016 in the Capital Market Segment & Options and Currency Derivatives Segment of the exchange.”
Since there was no response from the assessee, ld. AO completed the assessment by making the addition of Rs.3,57,490/- towards total sale consideration earned by the assessee in respect of LTCG earned through accommodation entries held as unexplained money. Ld. AO treated it as sale of bogus shares earned through paper/shell companies.
Aggrieved, assessee went in appeal before the Ld. CIT(A). Ld. CIT(A) noted that assessee served in the Defense Forces during the period under consideration. He observed that Ld. AO has reached the conclusion without conducting any independent enquiry as to whether assessee has in fact undertaken any transaction in the alleged penny stock of the three scrips. In respect of reply received from NSE by the Ld. AO that the three scrips were never listed on its platform, Ld. CIT(A) observed that when these scrips have never been listed on the platform of NSE, there is no possibility for the assessee to have transacted in these scrips and earned the alleged income from the transaction in penny stocks of the three scrips. Ld. CIT(A) thereafter, relied and referred to several judicial precedence to substantiate his observations and allowed the appeal of the assessee. Aggrieved, revenue is in appeal before the Tribunal.
We have carefully perused the orders of the authorities below. From the order of the Ld. AO, it is not discernible as to from where and how, Ld. AO got the information that assessee has undertaken transaction of sale of shares of the three companies which have been alleged as penny stocks to earn bogus LTCG. The reasons to believe recorded by the Ld. AO in this respect are also not available in the impugned assessment order. Ld. Sr. DR also could not place any cogent material before us in this respect. Adverse conclusion drawn by the ld. AO is based merely on a response from NSE that the said three scrips were never listed on this platform. To our mind, when these scrips were never listed on the platform of NSE, there would not have been any occasion for the assessee to undertake such sale transaction as alleged by the ld. AO to earn bogus LTCG.
10.1. The components of income noted by the Ld. AO as reported by the assessee in his return included salary and income from house property only, he being a defense personnel, thus by taking into these facts and on going through the impugned assessment order, we are unable to lay our hands to ascertain how Ld. AO formed his reasons to believe of assessee undertaking sale transaction of the three scrips to earn alleged bogus LTCG of an amount of Rs.3,57,490/- which has escaped assessment. Further, nowhere in the impugned assessment order, Ld. AO has captured the very basic details of purchase of shares, their sale values, quantity of each of the scrips, computation of LTCG on each of the scrips, dates of purchase and sale. There is nothing on record to corroborate these details for alleging the assessee to carry out such transactions. Nothing is mentioned about the bank accounts in which the sale consideration was credited.
10.2. We, find that there is no application of mind by the Ld. AO while arriving at an adverse conclusion without bringing any cogent material on record to fasten the assessee with the tax liability by alleging him to have entered into sale transaction to book bogus LTCG by way of accommodation entry. Considering the above stated facts and the observations, we do not find any reason to interfere with the findings given by the ld. CIT(A) and accordingly, grounds taken by the revenue are dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open Court on 6th October, 2023.