SMT. GEETA NARENDRA SHAH,MUMBAI vs. INCOME TAX OFFICER- 42(1)(2),MUMBAI, MUMBAI

The brief facts of the case are that the assessee filed the return by declaring total income of Rs.9,95,000/-. The information was received by the Ld. AO related to the transactions of penny stock as forwarded by the DDIT (Inv.)-32, Kolkata which was duly shared to the ADIT (Investigation unit), 82, Mumbai. As per the information, the assessee has made a transaction of scrip of M/s. Regency Trust Ltd. amount to Rs.20,73,810/-. The notice u/s 148 of the Act was initiated for reassessment and finally the Ld. AO passed an ex-parte order u/s 144 r.w.s. 147 of the Act. The Ld. AO had treated the the transacted scrip as “penny stock” and the additions were confirmed amount to Rs.20,73,810/- related to transaction of penny stock, amount of Rs.9,25,000/- under the head “Income from business or profession” on account of commission and professional income and Rs.2,75,000/- u/s 68 of the Act on account of cash deposited in bank account. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) passed a cryptic order without considering the assessee’s plea and upheld the impugned assessment order. Being aggrieved, the assessee filed an appeal before us.

We heard the rival submissions and considered the documents available in the record. The Ld. CIT(A), without allowing the assessee for submitting the evidence, passed a cryptic order and the relevant observations of the Ld. CIT(A) are reproduced as below: "I have gone through the Facts of the Case and have considered the material on record in the case of the appellant. In the instant case by going through the form-35 of appeal No. CIT(A), Mumbai-44/10188/2019-20 dated 23.11.20219 vide acknowledge No. 260356400231119 and form-35 of appeal No. CIT(A), Mumbai-44/10734/2018-19 dated 18.03.2019 vide acknowledge No. 435842410180319, in both these appeals amount of income assessed and total addition made as well as total disputed demand are found similar. Similarly assessment order for AY 2011-12 attached with both the appeals are also same. Prima facie the instant appeal filed seems to be infructuous. In view of above discussion and on merit the appeal no.CIT (A), Mumbai- 44/10188/2019-20 vide acknowledge No. 260356400231119 is dismissed.”

The Ld. DR argued and contended that the assessee had undertaken transactions in alleged penny stock scrips. It was submitted that such transactions are generally treated as bogus, and therefore, the addition made by the Ld. AO ought to be sustained. Accordingly, the Ld. DR supported the orders of the revenue authorities.

We have considered the rival submissions and perused the material available on record. It is observed that the assessee had filed the return of income, and based on information received from the Investigation Wing, the Ld. AO noted that the assessee had carried out transactions in the scrip of M/s. Regency Trust Ltd., which was treated as a penny stock. Consequently, the Ld. AO made additions by treating the entire transactions as non-genuine, including rejection of the business income and the cash deposits reflected in the bank account. It is further noted that the Ld. CIT(A), while disposing of the appeal, adjudicated the matter without calling for or examining the relevant evidences necessary for proper adjudication of the issue. So in our considered view, the assessee has not been afforded an effective and meaningful opportunity of being heard before the Ld. CIT(A). The principles of natural justice mandate that a litigant should be granted a fair opportunity to present its case, especially when the matter involves factual verification. Accordingly, in the interest of justice, we deem it appropriate to set aside the impugned appellate order and restore the matter to the file of the Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) is directed to decide the appeal afresh on merits by passing a reasonable and speaking order, after affording the assessee a reasonable opportunity of being heard. We clarify that we have not expressed any opinion on the merits of the case. The assessee is directed to extend full cooperation in the appellate proceeding and refrain from seeking any unnecessary adjournments. The Ld. CIT(A) shall adjudicate the issue strictly in accordance with law.

In the result, the appeal of the assessee bearing ITA No.1929/Mum/2026 is allowed for statistical purpose.