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Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Sanjay Garg, J & Dr. Manish Borad
Per Dr. Manish Borad, Accountant Member:- This appeal at the instance of assessee for assessment year 2012-13 is directed against the order of ld. Commissioner of Income Tax (Appeals), National
(A.Y. 2012-13) Fountain Vanijya Pvt. Limited (now merged with M/s. Ashiana Goods Pvt. Limited) Faceless Appeal Centre (NFAC), Delhi dated 15.03.2023, which is arising out of the order under section 144 of the Act on 04.12.2019 framed by ld. ITO, Ward-13(1), Kolkata.
At the outset, ld. Counsel for the assessee submitted that the assessment proceeding under section 147 of the Act read with section 143(3) deserves to be quashed as illegal and bad in law as reopening is based on bad reasons. Further referring to the judgment of the Hon’ble Calcutta High Court in the case of CIT –vs.- Infinity Infotech Parks Limited in ITAT No. 60 of 2014, G.A. No. 1736 of 2014, it was submitted that the reason for reopening of the case of the assessee was that the income of Rs.88,73,135/- had escaped assessment, which is generated by the assessee from sale of penny stock. The said reason is incorrect since the assessee has not shown any income from long-term capital gain/short-term capital gain/business loss at Rs.88,73,135/- and, therefore, since the reason to believe is bad, reopening of the assessment proceeding is consequently illegal and bad in law.
On the other hand, ld. D.R. supported the orders of both the lower authorities.
We have heard the rival contentions and perused the relevant records placed before us. We notice that the assessee is (A.Y. 2012-13) Fountain Vanijya Pvt. Limited (now merged with M/s. Ashiana Goods Pvt. Limited) a Private Limited Company and declared loss of Rs.2,22,391/- in the return for A.Y. 2012-13 on 22.09.2012. The said return was processed under section 143(1) of the Act on 21.02.2013. Thereafter based on the information, Ld. Assessing Officer observed that the assessee has sold BCE Scrip, Aagam Capital Limited at Rs.88,73,135/-, which in view of the Departmental Authorities is penny stock. In order to reopen the assessment, notice under section 148 of the Act was issued for recording following reasons:-
“The assessee company filed its return of income for the A.Y. 2012-13 on 22.9.2012 declaring total loss of Rs.2,22,391/-. The said return was processed vide order u/s 143(1) of the I.T. Act, 1961 on 21.02.2013. Subsequently, an information was received that the assessee has, during the F.Y. 2011-12, sold BSE Scrip, Aagam Capital Ltd. having code no. 531866 for Rs 88,73,135/-, which is a penny stock as per report furnished and has been used for generating bogus LTCG/STCL/Business loss. The complete transactions of purchase and sales of this penny scrip was managed, fabricated and manipulated to claim bogus loss/gain. Therefore, the assessee had taken the benefit of Rs 88,73,135/- during F.Y. 2011-12 relevant to A.Y. 2012-13. In view of the above, I have reason to believe that in this case, Rs.88,73,135/- had escaped assessment for the A.Y. 2012-13 within the meaning of section 147 of the I.T. Act., 1961 and the case may be re-opened accordingly”.
After going through the above reasons recorded for reopening, the ld. Assessing Officer had reason to believe that bogus loss/gain at Rs.88,73,135/- had escaped assessment. Before us, ld. Counsel for the assessee has submitted that during the year, the assessee had incurred long-term capital loss at Rs.2,43,05,824/- which, inter alia, included gain/loss dealing on 3
(A.Y. 2012-13) Fountain Vanijya Pvt. Limited (now merged with M/s. Ashiana Goods Pvt. Limited) the BCE Scrip of Aagam Capital Limited, but the assessee had not claimed any exemption or set off of the said loss against any income during the year and while computing the total income, the long-term capital loss in shares at Rs.2,43,05,824/- has been added back to the net loss as per Profit & Loss Account and the resultant loss of Rs.2,22,391/- has been declared as a business loss. This fact is verifiable from the copy of the income-tax return filed by the assessee under section 139(1) of the Act on 22.09.2012. Since the alleged transaction has already been recorded in the books of account and has been disclosed in the income tax return filed under section 139(1) of the Act and the reason to believe for reopening the assessment of escapement of income of Rs.88,73,135/- is incorrect, the very foundation of reopening proceeding becomes bad in law. The decision of the Hon’ble Bombay High Court in the case of CIT –vs.- Jet Airways India Limited (331 ITR 236) has been referred to by the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Limited – vs.- CIT reported in 336 ITR 136 and held that “reassessment must be in the first place, be in respect of income escaped assessment for which the reasons were recorded and only thereafter in respect of some other items of escaped income. If, however, the income, escapement of which was the foundation for recording of reasons to believe, is not assessed or reassessed in the order under section 147, then, it is not mere open to the ld. Assessing Officer to independently assess any other income, which comes to his notice subsequently”. Applying the proposition laid down by the Hon’ble Bombay High Court and Hon’ble Delhi High Court in the case of Jet Airways India Limited (supra) and (A.Y. 2012-13) Fountain Vanijya Pvt. Limited (now merged with M/s. Ashiana Goods Pvt. Limited) Ranbaxy Laboratories Limited (supra) and the same has been followed by the Hon’ble Jurisdictional High Court in the case of Infinity Infotech Parks Limited (supra), we are inclined to hold that the foundation of reopening alleging that the income of Rs.88,73,135/- has escaped assessment is wrong and incorrect and since the assessee had suo motu added back the long-term capital gain/loss incurred during the year to the income duly disclosed in income tax return, no addition is called for on the reasons recorded for reopening. We, therefore, quash the reopening proceeding being bad in law and allow the legal issue raised in Ground No. 2 of the assessee’s appeal.
So far as the remaining grounds are concerned, as we have already quashed the assessment proceeding and deleted the additions dealing with the same will be merely academic in nature and thus rendered infructuous.