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Facts
The assessee filed an original return of income which was processed. Subsequently, a notice u/s 148 was issued for reopening the assessment, alleging bogus long-term capital gain. The assessee filed a revised return, and the assessment was framed at the same income, with an addition made for short-term capital gains u/s 68. The assessee challenged this order.
Held
The Tribunal held that the reasons recorded for reopening the assessment were factually incorrect, as the assessee had earned short-term capital gains which were duly disclosed. Since the assessment was framed at the original returned income and there was no escapement of income, the assessment order was quashed.
Key Issues
Whether the reopening of assessment under Section 147 was valid when the grounds recorded were factually incorrect and there was no escapement of income.
Sections Cited
147, 144C(13), 153, 144C(5), 148, 143(1), 68
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Before: SHRI BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 05.03.2025 घोर्णध की िधरीख/Date of Pronouncement 28.03.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Income-tax Officer, Int. Tax Ward 4(2)(1)), Mumbai [hereinafter referred to as “AO”] dated 03.01.2023 passed u/s. 147 r.w.s. 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.
The assessee has raised the following grounds of appeal:
1. In the facts and circumstances of the Appellant's case and in law, the order dated 03.01.2023 passed by the Ld. Assessing officer under provisions of A.Y. 2017-18 Vijay Kumar Saraff section 147 r.w.s. 144C(13) of the Income-tax Act, 1961 is barred by limitation in view of provisions of section 153 of the Act and is, therefore, bad in law and illegal.
2. In the facts and circumstance of the Appellant's case the directions issued by Dispute Resolution Panel u/s 144C(5) of the Income-tax Act 1961 are bad in law.
3. In the facts and circumstance of the Appellant's case, initiating proceedings u/s 147 of the Act based on reason recorded for the purpose of reopening of assessment is bad in law.
4. Ld. AO grossly erred in concluding assessment proceedings without providing reasonable opportunity to cross examine the witness, not providing underlying material relied upon by the Ld. AO for forming an opinion on the involvement of the Appellant.
5. Ld AO grossly erred in making addition of income u/s 68 of the Act in respect of short-term capital gains earned by the Appellant on transfer of listed equity shares. In doing so, Ld. AO failed to appreciate the evidences produced by appellant.”
Brief facts of the case are that the original return declaring income of Rs. 93,81,660/- was filed on 09.03.2018 which was processed u/s 143(1) of the Act. Subsequently, on receipt of information from the Investigation Wing, a notice u/s 148 was issued on 31.03.2021 on the ground that the assessee had received bogus a long-term capital gain of Rs. 78,19,477/- from trading in M/s. Kushal Ltd. scrip during the year under consideration. In response to the notice, the assessee filed return on 17.04.2021 declaring the same income as in the original return. Subsequently, the assessment was also framed at the same income of Rs. 6,93,81,630/- after holding that the assessee has shown bogus short-term capital gain and the profit therefrom amounting to Rs. 76,34,282 was added u/s 68 of the Act.
The assessee has challenged the order u/s 147 r.w.s. 144C(13) dated 03.01.2023 before the Tribunal. Before us, Ld. AR has argued that the reasons A.Y. 2017-18 Vijay Kumar Saraff recorded were incorrect as it was mentioned that the assessee had generated bogus long-term capital gain through trading in penny stocks. However, the assessee had in fact shown short-term capital gain from the transaction of shares of M/s. Kushal Ltd. and short-term capital gains from these which were duly reflected in the original return of income.
Ld. DR, on the other hand, relied on the order of Ld. AO.
We have heard the rival submissions and perused the material available on record. It is seen that while recording the reasons for reopening, Ld. AO has categorically mentioned that the assessee had received bogus long-term capital gain of Rs. 78,19,477/- while trading in M/s. Kushal Ltd. scrip during FY 2016- 17. However, the reasons recorded were factually incorrect as the assessee in fact earned short-term capital gain from the transactions in shares of M/s Kushal Ltd. which was also duly disclosed in his original return of income. We also note that the assessment u/s 147 r.w.s. 144C(13) has also been framed at the original returned income i.e. Rs. 93,81,660/-. It is, therefore, also clear that there was no escapement of income in this case.
In view of the above facts, we hold that the reasons recorded for reopening of the assessment u/s 148 were incorrect, and accordingly, the assessment order u/s 147 r.w.s. 144C(13) is hereby quashed.
A.Y. 2017-18 Vijay Kumar Saraff 8. In view of the above facts, the remaining grounds of appeal raised by the assessee are rendered academic in nature, and hence, are not being adjudicated upon.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 28.03.2025.