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Facts
The assessee filed a return declaring nil income. The AO initiated reassessment proceedings based on information that the assessee was a beneficiary in trading shares of a penny stock company. The AO made additions under Section 68 of the Income Tax Act, treating the sale consideration as non-genuine.
Held
The Tribunal noted that the revenue authorities overlooked documents submitted by the assessee and made additions based on preconceived notions and investigation reports without proper verification. The Tribunal decided to restore the matter to the AO for de novo adjudication.
Key Issues
Whether the assumption of jurisdiction under Section 147 was valid and if the addition under Section 68 was justified without proper verification of documents and principles of natural justice.
Sections Cited
147, 68, 250
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Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN
Date of Hearing 29.01.2025 Date of Pronouncement 07.03.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 13.08.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A) Mumbai, for the A.Y 2012-13. The assessee has raised the following grounds of appeal:
1) 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), NFAC erred in not holding the assumption of jurisdiction by the Ld. A. O. as bad in law as the conditions laid down for initiating assessment proceedings u/s 147 of the Income Tax Act, 1961 have not been fulfilled.
2 Manoj Jian HUF, Mumbai.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC erred in confirming the addition u/s 68 of the Income Tax Act, 1961 of Rs. 29,19,330/-, being sale consideration received on sale of shares of M/s Swarnsarita Gems Limited, by holding the genuine transactions in respect of trading in the shares of M/s Swarnsarita Gems Limited as non-genuine.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC erred in holding that there was no violation of principles of natural justice as the Ld. Assessing Officer had not provided the appellant with any material/corroborative evidence to substantiate his case and not provided the opportunity to cross examine to the appellant while relying on a third-party statement.
4. On the facts and in the circumstances of the case and in law, the impugned assessment order is void ab initio as the order passed by the Ld. Assessing Officer dated 20.12.2016 does not bear any Document Identification Number (DIN) on its assessment order body as mandated by the Circular No. 19/2019 issued by the CBDT.
5. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another.
As per the facts of the case during the year under consideration, assessee filed return of income declaring nil income. However, on the basis of information received by the AO from DDIT investigation that M/s. Swarnasarita 3 Manoj Jian HUF, Mumbai.
Gems Ltd is a penny stock company listed under BSE, and as per his information assessee is one of the beneficiary, who had traded the shares, during the year under consideration and accordingly initiated proceedings for reopening of assessment after recording reasons.
During the course of reassessment, the assessee submitted return of income, balance sheet, P&L account, audit report, computation of income, contract notes, etc and submitted that no LTCG has been claimed
Since AO was of the view that assessee is one of the beneficiary and trading in the above penny stock was manipulated affair to generate entries of bogus LTCG/STCG/business loss to facilitate tax evasion and thus called for more details, but assessee could not submit the same. Therefore AO completed the assessment by making additions u/s 68 of the Act.
Although appeal was filed by the assessee along with application for additional evidence, but Ld. CIT(A) while seeking the remand report, rejected the appeal on the pre- conceived notion that the trading transaction in respect of shares of M/s Swarnasarita Gems Ltd were bogus, as there is investigation report informing that the company is a penny stock.
4 Manoj Jian HUF, Mumbai.
After having heard the counsels for both the parties and perusal of the documents placed on record and the orders passed by the revenue authorities, we noticed that the revenue authorities have completely overlooked the various documents and supporting evidences submitted by the assessee. These documents have not been analysed and on the basis of preconceived notion additions were made on the basis of investigation carried on by the investigation agencies and eventually no verification was done on the various documents placed on record by the assessee. We observed from the record that assessee has purchased and sold the shares in question through recognised stock exchange and authorised brokers and nowhere it is brought on record that assessee is one of the party involved in the entry provider or involved in manipulating the prices or it is proved that assessee is one of the entry provider.
Be that, as it may, without commenting anything on merits, we are of the view that the interest of justice would be met only in case the matter is restored back to the file of AO with the direction to consider the various documents and supporting evidence submitted by the assessee and to call for any other documents, if so required and thereafter adjudicate the issues raised by the assessee on merits and 5 Manoj Jian HUF, Mumbai. in accordance with law. At the same time, the assessee is also directed to be vigilant to respond to all the queries in this regard. Consequently, all the grounds raised by the assessee are allowed for statistical purposes. The AO is also directed to conduct denovo adjudication leaving all issues wide open.
Before parting, we make it clear that our decision to restore the matter back to the file of the Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute which shall be adjudicated by the Ld.CIT(A) independently in accordance with law.
In the result the appeal filed by the assessee is allowed for statistical purposes.