LEKHRAJ JASRAJ JAIN ,MUMBAI vs. DCIT 19(1), MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT () & SHRI RAJ KUMAR CHAUHAN () Assessment Year: 2014-15
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated
10.06.2025 passed by the Ld. Commissioner of Income-tax
(Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld.
CIT(A)’] for assessment year 2014-15, raising following grounds:
1. On the facts and in the circumstances of the case and in law, the assumption of juri iction by the Ld. AO was bad in law as the conditions laid down for initiating assessment proceedings u been fulfilled.
2. On the fac the Ld. CIT(A 55,49,342/- a being sale pr sale of share recognised s documentary the genuinene appreciating
Assessing O conjectures a non-assessee
Investigation
3. On the fac the Ld. CIT
Rs.1,10,986/
paid by the shares of Ma that the a accommodatio addition was the basis of e
4. On the fac the Ld. Asses
Rs. 55,49,342
u/s 69C of th the material opportunity of statement re principles of additions uns
2. Before us, the ground No. 1 of the and same being legal admitted.
u/s 147 of the Income Tax Act, 1961 hav cts and circumstances of the case and in (A) erred in confirming the addition o as unexplained cash credits u/s 68 of th roceeds received through banking chann es of Matra Kaushal Enterprises Limite stock exchange, disregarding the evidences furnished by the appellant to ess of the impugned transactions and w that the addition was made by th
Officer solely on the basis of susp and surmises relying upon general, vagu e specific forwarded information received
Wing.
cts and circumstances of the case and in T(A) erred in confirming the additio
- u/s 69C of the Act, being alleged comm appellant at 2% of sale proceeds on s atra Kaushal Enterprises Limited, disrega appellant has not taken any a on entry and without appreciating tha made by the Ld. Assessing Officer sole stimation and conjectures.
cts and circumstances of the case and in ssing Officer erred in making the additio
2/- u/s 68 of the Act and of Rs. 1,10, he Act without providing the appellant a co and statement relied upon as well a of cross-examination of the persons on w eliance was placed, in gross violatio of natural justice, thereby making sustainable.
Ld. counsel for the assessee appeal might be treated as ad l ground going to the root of the Lekhraj J. Jain
2
ve not n law, of Rs.
he Act, nel on ted on ample prove without he Ld.
picion, ue and d from n law, on of mission sale of arding alleged at the ely on n law, ons of ,986/- opy of as an whose on of g the submitted that dditional ground e matter may be 3. We have heard issue relating to the assessee has made additional ground, s incorporated in F
Representative (Ld. D admission of this gr validity of the reasse matter, without nece we deem it appropria
4. Addressing the reassessment procee drew our attention t
33. He specifically ref recorded by the Ass which, for the sake o
“Reasons fo
Income Tax,
The assessee consideration
2. An informa of Income-ta investigation scheme was accommodatio stock market.
entry of bogu gains and bo through tradin d the rival submissions of the e admissibility of the addition an oral plea to treat this submitting that the same ha orm
No.
36. The learned
DR) has not raised any serious round. Since the ground chal ssment proceedings and goes to essitating any further investiga ate to admit the same for adjudic additional ground impugning th edings, the learned counsel fo o the Paper Book filed, compri ferred to page 8 thereof, contain sessing Officer for reopening t f completeness, are reproduced or re-opening of the assessment u/s.
e has not filed return of income for the n.
ation was received in this case from the ax
(investigation),
Kolkata, stating carried out by the department had pro hatched by various players to obta on entry of bogus LTCG through mani
. Various syndicates had arranged acco us long term capital gain, bogus short t ogus short term capital loss / bogus bu ng of shares of various penny stock comp
Lekhraj J. Jain
3
parties on the nal ground. The ground as an as already been Departmental objection to the lenges the very o the root of the ation into facts, cation.
he validity of the or the assessee ising pages 1 to ning the reasons the assessment, below:
147 of the year under Directorate that the oved that a ain/provide ipulation of ommodation erm capital usiness loss panies.
The inves Directorate re companies wa LTCG to conve earned again Kolkata Inves through whom they charged transactions. the shares of income and t income withou 4. As per the shares of t consideration term capital g Through the undisclosed i his Return of 4.1 The learned c attention to page 1 o of income filed on 30 that despite the retur while recording reas return of income ha application of mind recorded are founde paragraph 5 of the a described the LTCG c “detailed investigation 4.2 The learned cou of the Co-ordinate Be stigation conducted by the Kolkata In evealed that the trading in shares of p as a manipulated affair to generate entri ert undisclosed income into tax free incom nst sale of shares is an exempt income. F stigation Directorate informed that all su m such transaction were carried out, ad d commission on the amount involved It was also informed that the assesse ha f penny stock companies to generate b thereby converted undisclosed Income in ut paying taxes. e information available on record, the as the penny stock companies "MKEL" n of Rs.55,63,257/- and has not declare gains against the sale of above penny sto e said transaction, the assessee income into tax-free income by not offerin f Income. counsel for the assessee the f the Paper Book, which is a co 0.03.2016 in the regular course rn having been duly filed, the As ons for reopening, erroneously ad been filed — a manifest in . It was further contended th ed purely on suspicion, as i assessment order, where the A claim as “suspicious” and propo n.” unsel further placed reliance up ench of the Tribunal in Ashok J Lekhraj J. Jain 4 nvestigation penny stock ies of bogus me as LTCG Further, the uch brokers dmitted that d in these ad traded in bogus LTCG nto tax free ssesse sold " for total ed any long ock shares. converted ng LTCG In ereafter invited py of the return e. He submitted ssessing Officer, y stated that no nstance of non- hat the reasons is evident from Assessing Officer osed to conduct pon the decision Jasraj Jain (HUF) v. ITO in ITA No. 56 wherein, in identical were held to be inval of “reason to believe. case demonstrates proceeded on incorre and had reopened arising from informa relevant finding in t reproduced as under “8. We have heard riv perused the relev validity of reassess Therefore, it is Assessing Officer, w -2, as under: 1. An information wa (Investigation), K department had p obtain/provide manipulation of accommodation e capital gain and b trading of shares o 2. The investigation revealed that the manipulated affa undisclosed incom shares is an exemp informed that all carried out, adm involved in these traded in the sha income and there
609/Mum/2019 for Assessment circumstances, the reassessm lid for want of application of mi
.” The relevant findings of the T that the Assessing Officer th ect assumptions that no return the assessment based merely ation received from the Investiga the case of Ashok Jasraj Jain
:
val submission of the parties on the issue in vant material on record. The assessee has sment proceeding in view of defects in reas relevant to reproduce the reasons reco which are available on page 10 and 11 of th as received in this case from the Directorat
Kolkata, stating that the investigation come proved that a scheme was hatched by vario accommodation entry of bogus
LTC f stock market. Various syndicates ha entry of bogus long term capital gain, bogu bogus short term capital loss/bogus business of various penny stock companies.
n conducted by the Kolkata Investigation e trading in shares of penny stock comp air to generate entries of bogus LTCG me into tax free income as LTCG earned ag pt income. Further, the Kolkata Investigatio l such brokers through whom such tran mitted that they charged commission on transactions. It was also informed that the ares of penny stock companies to generate eby converted undisclosed income into tax
Lekhraj J. Jain
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t Year 2014–15, ment proceedings nd and absence
Tribunal in that herein had also n had been filed y on suspicion ation Wing. The HUF (supra) is n dispute and s assailed the ons recorded.
orded by the he paperbook te Income-tax es out by the ous players to CG through ad arranged us short term s loss through n Directorate panies was a G to convert gainst sale of n Directorate saction were the amount e assessee has e bogus LTCG x free income without paying suspended trading to its investigatio action u/s 132 a operators who w companies. It was were artificially purpose of giving gains against equi
The list of such co
Kaushal Enterpris
3. As per the inform penny stock comp disclosed the recei
4. The company M/s
2013. Thus its per prices short perio the assessee is une
5. On the basis of the applying my mind of ₹1,67,70,454/- meaning of sectio reopened u/s 147
8.1 Firstly, the as proceeding on the Officer while recor
We find that the A noted that the ass has not filed the re a copy of return o
The Assessing Offi filing of regular r said return of inco shares amounting gain and claimed recorded reasons the information re available with him mind on the part the assessment. In (Del), the Hon’ble taxes. Information was received that th g in shares of several penny stock companie on. The Investigation Wing Kolkata had ca and survey action u/s 133A of the I.T. Ac were indulging in trading in shares of s found during the search and survey that rigging the prices of several such compa accommodation entries in the form of long ivalent amount of cash after deducting their ompanies included the penny stock compan ses Ltd. (MKEL).
mation available on record, the assessee so pany M/s MKEL ₹1,67,70,454/-. The asses ipt and has not filed the return of income.
s MKEL had losses for the year ending 201
rformance did not command any substantia d. In view of all the above facts, the amoun explained.
e aforesaid information available with me a d, I have reasons to believe that income char has escaped assessment for AY 2014-15
on 147 of the I.T. Act, 1961. Accordingly of the I.T. Act, 1961 for AY 2014-15. sessee has challenged the validity of the e ground of nonapplication of the mind by rding reasons to believe that income escape
Assessing Officer in Para 3 of the reasons sessee has not disclosed the receipt of ₹1,67, eturn of income, whereas before us the asse of income filed under provision of section 13
icer in the assessment order has also record return of income by the assessee on 23/03/
ome, the assessee has declared the receipt o g to ₹1,67,45,253/- under the head long- the same as exempt. Therefore, the Assessin to believe based on incorrect facts merely o eceived and without verifying the same fro m. It makes clear that there is a total non-a of the AO while recording the reasons for n the case of CIT v. G & G Pharma (2015)
Delhi High Court held that the AO should a Lekhraj J. Jain
6
he SEBI has es consequent arried search ct on various penny stock the operator anies for the g term capital r commission.
ny M/s Matra ld shares the sesse has not 11, 2012 and al increase in nt received by and after duly rgeable to tax
5 within the y, the case is reassessment the Assessing d assessment.
recorded has ,70,454/- and essee has filed
39 of the Act.
ded the fact of /2016. In the on sale of the -term capital ng Officer has on the basis of om the record application of reopening of 384 ITR 147
pply his mind in order to form re one of the basic re
8.2 Secondly, we f of trading in som
(SEBI), but nowhe
MKEL was ever su
MKEL is not releva the case of the ass
Jhaveri Stock Bro stage of issue of material on whic belief that incom information refer shares is not relev shares of MKEL ha
8.3 Thirdly, the A case was reopen assessment and t finding of the Asse
“5. Suspicion of Re
5.1 The assessee e claimed it as exem term capital gain issue was underta
ITD data, BSE data as well as investig
8.4 It is evident recorded where h thereafter he is ref where he has refe data, BSE data, m well as investiga contention of the suspicion before c not borne out of a 8.5 The Ld. Couns
Court in the case
Hon’ble High Cou easons to believe that income has escaped a equirement of section 147 of the Act.
find that the Assessing Officer has referred t me shares by the Security and Exchange Bo ere pointed out whether any trading in the uspended. Suspension of trading in the shar ant for making belief that income escaped a sessee. The Hon’ble Supreme Court in the c kers Private limited 291 ITR 500 (SC), hel f notice, the question is whether there w ch a reasonable person could have forme me escaped assessment. But, in the pres rred that SEBI suspended trading in some vant for forming belief that income arising as escaped assessment.
ssessing Officer in assessment order has r ned in view of the suspicion that inco therefore wanted detailed investigation.
essing Officer is reproduced as under:
evenue earned long term capital gain in the curr mpt u/s 10(38) of the act. This quantum was found suspicious and detailed investig aken. Various tools available were examin a, money control website, taxman, court rul ation wing report and findings of the SEBI.”
that the Assessing Officer is referring to he found the long-term capital gain as su eferring to the detailed investigation undert erred to various tools including Income-tax money control website, taxman, court ruling tion wing report and finding of the SEB e Ld. DR that Assessing Officer has ref carrying out investigation by the Investiga bove factual position and therefore same is sel relied on the decision of the Hon’ble B e of Coronation Agro industries Ltd (sup urt has held that reassessment proceedi
Lekhraj J. Jain
7
assessment, is to suspension oard of India shares of the res other than assessment in case of Rajesh ld that at the was relevant d a requisite ent case the e penny stock g from sale of recorded that ome escaped
The relevant rent year and of huge long gation of this ned including lings, internet
”
the reasons uspicious and taken by him, x Department gs Internet as BI. Thus, the ferred to the ation Wing, is rejected.
Bombay High pra), wherein ng based on reason to suspect
Court is reproduce
“4. We note that t fact that as a ma exchange makes m of any securities, a may have occurre the basis for the A basis for the Asses been any escapem in the client cod occurred while pu a client code mod link from there to of its income. Prim and not reason t assessment.
5. In the above vi notice is without chargeable to tax
8.6 Similarly the T case of Dove Con
Assessment Year reliable material the Tribunal quash
8.7 Similarly, Hon in the case of PCIT
Court) in Income that reassessmen transactions in the 8.8 In the instant long term capital and not as relia investigation. In o
High Court in th above, the Assessi on the reason to su cannot be valid. The relevant finding of the ed as under:
the reasons in support of the impugned noti atter of regular business practice, a broker modifications in the client code on sale and/
after the trading is over so as to rectify any d while punching the orders. The reasons do
Assessing Officer to come to reasons do not ssing Officer to come to reasonable belief th ment of income on the ground that the modif de was not on account of a genuine erro unching the trade. The material available is dification done by the Assessee's broker bu conclude that it was done to escape assessm ma facie, this appears to be a case of reas to believe that income chargeable to tax iew, prima facie, we are of the view that t juri iction as it lacks reason to believe has escaped assessment."
Tribunal Delhi bench in decision dated 29/
nsultants Pvt. Ltd. Vs DCITITA No. 1197/D
2009-10 held that reopening has to be b and not on the basis of reason to suspect, hed the reassessment proceeding.
’ble Bombay High Court in judgment dated
T Vs M/s. Shodiman Investments Pvt. Ltd. (B
Tax ITA. 1297 of 2015 Assessment Year 2
t proceeding cannot be initiated based o e bank account of Mahasagar Securities Ltd case also according to the Assessing Officer gain declared by the assessee as suspicious ble information and for ascertaining, he ur opinion, in view of the decision of the Hon e case of Shodiman Investments P. Ltd. ( ing Officer is not permitted to reopen asses uspicion.
Lekhraj J. Jain
8
Hon’ble High ice accept the r in the stock
/ or purchase y error which o not indicate t indicate the hat there has fications done or, originally s that there is ut there is no ment of a part on to suspect has escaped the impugned that income
/09/2021 the /Del/2019 for based on the , accordingly, d 16/04/2018
Bombay High
2003-04 held on suspicious d.
r he found the s transactions e needed the n’ble Bombay
(supra) cited ssment based
9 In view of abov the case of the as quashed. The addi 5. We have carefu the material placed the authorities below additional ground r foundation and ju proceedings initiated 5.1 Upon a meticulo Assessing Officer for are couched in terms Coordinate Bench of (HUF) v. ITO (ITA N instances, the Asse premise that the ass relevant assessmen evidences that the course under section strikes at the very ro Assessing Officer and mind. 5.2 Further, in both mere suspicion rega ve discussion, the reassessment proceedings ssessee are held to be invalid and accordin itional ground raised by the assessee is allow ully considered the rival submi on record, and duly examined w in the light of the settled leg raised by the assessee challe uri ictional validity of the under section 147 of the Act. ous examination of the reasons r reopening the assessment, we s virtually identical to those co f this Tribunal in the case of As No. 5609/Mum/2019, A.Y. 201 essing Officer proceeded on sessee had not filed a return of t year, whereas the record return had indeed been filed n 139 of the Act. This fundamen oot of the "reasons to believe" d is indicative of a complete no h instances, the Assessing Offic arding the genuineness of lon Lekhraj J. Jain 9 s completed in ngly same are wed.” issions, perused the findings of gal position. The enges the very reassessment recorded by the e find that they onsidered by the shok Jasraj Jain 14–15). In both the erroneous f income for the d unmistakably in the regular ntal factual error recorded by the on-application of er proceeded on ng-term capital gains and sought to r investigation,” which 5.3 In the case of A the assessment ord quantum of long term detailed investigation reopening of the asse 5.4 Further, the re that the reopening w received from the entries in penny stoc of forming an indepe the assessee with su contents of the infor genuineness of the lo a “detailed investigat assessment cannot b or for the purpose of 5.5 The Hon’ble Bo DCIT (2019) 412 ITR Assessing Officer see facts or conduct fu juri iction. Similarl reopen the assessment to under is impermissible under law. Ashok Kumar Jasraj Jain (sup der, the Assessing Officer m m capital gain was found to be n was intended to be underta essment. easons recorded, read in their was founded merely on generali Investigation Wing, alleging ck transactions. The Assessing endent belief based on tangible ch alleged transactions, merely rmation and expressed suspicio ong-term capital gains, proposin tion.” It is trite law that the pow be exercised on the basis of a re making roving or fishing inquiri ombay High Court in Precision 43 (Bom) has categorically held eks to reopen an assessment m urther inquiries, such reopen ly, in Coronation Agro Industri Lekhraj J. Jain 10 rtake a “detailed ra) in para 5 of mentioned that suspicious and aken by way of entirety, reveal ized information accommodation Officer, instead material linking y reproduced the on regarding the ng to undertake wer to reopen an eason to suspect ies. Holdings Ltd. v. d that where the merely to verify ning is without ies Ltd. v. DCIT
(2017) 390 ITR 464 (B
(ITA No. 1297 of 2015
been held that reass reason to suspect rath
5.6 The Coordinate identical facts, quash the assumption of incorrect factual pre mind, renders the p down therein squarel
5.7 Applying the ra having regard to th herein, we are of the by the Assessing Off non-application of m material relied upon reopening of assess factual inaccuracies,
5.8 Accordingly, fol juri ictional High C
Ashok Jasraj Jain (H proceedings initiated without juri iction.
Bom) and PCIT v. Shodiman Inve
5, judgment dated 16.04.2018, sessment proceedings initiated her than reason to believe are in Bench in Ashok Jasraj Jain (H hed the reassessment proceedin juri iction under section 1
mises and without independen proceedings void ab initio. The ly applies to the facts of the pres atio of the aforesaid judicial p he indistinguishable factual m e considered opinion that the re fficer suffer from the same incu mind and absence of any live nex n and the alleged escapement sment, being based on mere is thus devoid of juri ictional llowing the binding precedents
Court and the Coordinate Ben
(HUF) (supra), we hold that th d under section 147 of the Act
The same are hereby quashed.
Lekhraj J. Jain
11
estments (P) Ltd.
Bom HC), it has on the basis of nvalid in law.
HUF) (supra), on ngs holding that 147, based on nt application of e principle laid sent case.
precedents, and matrix obtaining easons recorded urable defect of xus between the of income. The suspicion and foundation.
s of the Hon’ble nch decision in he reassessment are invalid and 5.9 The additional allowed.
6. Since we have al arguments raised by rendered academic an 7. In the result, th
Order pronoun (RAJ KUMAR C
JUDICIAL M
Mumbai;
Dated: 12/11/2025
Rahul Sharma, Sr. P.S.
Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
////
ground raised by the assessee lready quashed the reassessme y the parties on the merit of t nd therefore, we are not adjudic he appeal filed by the assessee is ced in the open Court on 12/
d/-
S
CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA ded to :
BY ORDER
(Assistant Re
ITAT, Mu
Lekhraj J. Jain
12
e is accordingly ent proceedings the addition are cating the same.
s allowed.
11/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai