ACIT CIRCLE - 22(1), MUMBAI, MUMBAI vs. NILESH HARESH PARWANI, MUMBAI

Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the crucial finding of the Investigation carried out by the Kolkata Investigation Directorate and their detailed investigation report titled Project Bogus LTCG/ STCG through BSE listed Penny Stock" and assessee is one of the beneficiary of that dubious scheme.

Whether on the facts and in circumstance of the case and in law, Ld. CIT(A) ignores the facts brought on record establishing manipulation of share prices of M/s Pine Animation Limited (Scrip Code: 511421) as part of colourable device to generate fictitious Long Term Capital Gain/ Short Term Capital Loss with the aim to evade taxes due.

On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO without appreciating the facts that in such penny scrip, trading transactions of purchase and sales are not affected for commercial purpose but to create artificial Gain/loss and complete the cycle of circular trading with a view to evade taxes.

On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact that transaction of shares of such penny scrip are not governed by market factors prevalent at relevant time rather transactions are product of design and mutual connivance on part of assessee and operators.

"Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) was justified in deleting the addition made by the AO on transaction

"Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the crucial finding of the survey action u/s 133A of the Act that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the SEBI guidelines have been flouted by the J M Mutual Fund by classifying a portion of capital as distributable surplus and thereafter artificial payout to the investor in the form of dividend and assessee is one of the beneficiary.'

"On the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition made by the A.O. even though it is well established that the modus operandi of these sham transactions of generating bogus LTCG/ STCG had to be considered in the light of surrounding circumstances, normal course of human conduct and preponderance of probability."

"On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact of the case and modus operandi utilized by entry operators for providing accommodation entries under the garb of Long Term Capital Gain/ Short Term Capital Gain Loss by manipulating/rigging up the share price."

While in its Cross Objection, the assessee has raised the following grounds: –

The Learned Assessing Officer has erred in passing the assessment order u/s. 147 r.w.s 144B of the Income Tax Act, 1961, which is time barred as per the provision of the Act, therefore, the impugned assessment order is bad in law and required to be quash.”

Since the issue raised by way of additional ground in the Cross Objection is a legal issue, which can be decided on the basis of the material available on record, therefore, the same is admitted in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs. CIT, reported in (1989) 229 ITR 383 (SC).

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual. For the year under consideration, the assessee filed his return of income on 30.08.2015, declaring a total income of Rs.5,66,52,690/-. The return filed by the assessee was selected for scrutiny, and vide order dated 31.12.2017 passed under section 143(3) of the Act, the total income of the assessee was assessed at Rs.6,95,55,810/-. Subsequently, on the basis of the information received through the Insight System of the Department pertaining to survey action conducted under section 133A of the Act in the case of M/s. J.M. Financial Asset Management Limited (“JM Financial”), wherein it was found that JM Financial had manipulated accounting methodology so as to inflate

After rejecting the objections filed by the assessee, an order under section 148A(d) of the Act was passed on 23.07.2022, declaring that it is a fit case for the issuance of a notice under section 148 of the Act. Thereafter, on 25.07.2022, a notice under section 148 of the Act was issued by the Juri ictional Assessing Officer. The assessment order was passed under section 147 r.w. section 144B of the Act, assessing the total income of the assessee at Rs.7,99,46,074/-, after making a total addition of Rs.1,03,90,264/- on account of disallowance of short-term capital loss and dividend income claimed as exempt by the assessee. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee on merits and deleted the additions made by the AO. While on juri iction, the learned

During the hearing, the learned AR submitted that the year under consideration is assessment year 2015-16, and therefore, the limitation period available with the Assessing Officer under section 149 of the Act for issuance of notice under section 148 of the Act is till 31.03.2022, and therefore, the notice issued under section 148 of the Act on 25.07.2022 is barred by limitation. Hence, it was submitted that the entire re-assessment proceedings culminating in the order passed under section 147 r.w. section 144B of the Act is void ab initio. The learned AR by placing reliance upon various judicial pronouncements, submitted that a similar challenge in respect of the assessment year 2015-16 has been considered by the Hon’ble Delhi High Court and the Co-ordinate Bench of the Tribunal, and the issue was decided in favour of the taxpayer, inter alia, by considering the submission of the Revenue before the Hon’ble Supreme Court in Union of India vs. Rajeev Bansal, reported in (2024) 469 ITR 46 (SC).

On the other hand, learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the AO.

We have considered the submissions of both sides and perused the material available on record. We, at the outset, find that similar issue pertaining to the challenge against notices issued under section 148 of the Act for the assessment year 2015-16 on the basis that same are beyond the limitation period prescribed under section 149 of the Act has been decided in ITA No.266/MUM/2025 & CO No.46/MUM/2025 (A.Y.: 2015-16) favour of the taxpayers after noting the submission of the Revenue before the Hon’ble Supreme Court in Rajeev Bansal (supra), wherein it was conceded by the Revenue that for the assessment year 2015-16, all notices issued on or after 1st April, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“the TOLA”). We find that the Hon’ble Delhi High Court in Pratishtha Garg vs. ACIT, reported in (2015) 171 taxmann.com 264 (Delhi), allowed the writ petition filed by the taxpayer and set aside the notice issued under section 148 of the Act for the assessment year 2015-16, by observing as follows: -

In view of the aforesaid, the impugned order dated 19.07.2022 issued under Section 148(A)(d) of the Income Tax Act,1961 (hereafter the Act) as well as the notice dated 19.07.2022 issued under Section 148 of the Act in respect of AY 2015-16 are liable to be set aside. It is so directed.”

We further find that similar findings were rendered by the Hon’ble Delhi High Court in IBIBO Group Pvt. Ltd. vs. ACIT, in W.P.(C) No.17639 of 2022, vide order dated 13.12.2024. We find that in the following decisions of the Co-ordinate Bench of the Tribunal, on similar lines, re-assessment notices issued under section 148 of the Act for the assessment year 2015-16 were quashed: -  ACIT vs. Manish Financials, ITA No.5050 and 5055/Mum/2024 order dated 02.12.2024.  ITO vs. Pushpak Realities Pvt. Ltd., ITA No.4812/mum/2024, order dated 07.09.2024. 13. We further find that vide a recent order dated 04.04.2025, the Hon’ble Supreme Court in ACIT vs. Nehal Ashit Shah, in SLP (C) Diary No.57209 of 2024, upheld the quashing of the re-assessment proceedings initiated for the assessment year 2015-16 considering the submissions of the Revenue as recorded in paragraph 19(e) and 19(f) of the decision in Rajeev Bansal (supra).

Since the relief has been granted to the assessee on the afore-noted juri ictional aspect, the other submissions raised by the learned AR during the hearing are rendered academic and, therefore, are left open.

Accordingly, the appeal by the Revenue on merits has been rendered academic and, therefore, is dismissed as infructuous.

In the result, the Cross Objection by the assessee is allowed, while the Revenue’s appeal is dismissed. Order pronounced in the open Court on 24/04/2025 VIKRAM SINGH YADAV ACCOUNTANT MEMBER SANDEEP SINGH KARHAIL JUDICIAL MEMBER