ASHOK JASRAJ JAIN, HUF,MUMBAI vs. ACIT-19(1), MUMBAI

PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 24/06/2019 passed by the Ld. Commissioner of Income- tax(Appeals)-30, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2014-15. In the proforma prescribed for filing appeal, the assessee has raised various grounds challenging the addition of ₹1,67,70,454/- made by the Assessing Officer, which has been

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confirmed by the Ld. CIT(A). Before us, the assessee filed application confirmed by the Ld. CIT(A). Before us, the assessee filed application confirmed by the Ld. CIT(A). Before us, the assessee filed application on 04/08/2022 for raising additional on 04/08/2022 for raising additional ground as under: round as under:

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i.e. AY 2014-15 on 28/03/2016 declaring total income of on 28/03/2016 declaring total income of on 28/03/2016 declaring total income of ₹4,66,879/-. The return of income filed by the assessee was The return of income filed by the assessee was The return of income filed by the assessee was processed under section 143(1 ssed under section 143(1) of the Income-tax Act, 1961 ( tax Act, 1961 (in short ‘the Act’).

3.1 Thereafter, on the receipt of information from on the receipt of information from on the receipt of information from the Directorate of Income-tax (Investigation), Kolkata, the ax (Investigation), Kolkata, the Assessing Officer Assessing Officer recorded reasons to believe that income recorded reasons to believe that income had escape escaped assessment and he issued notice under section 148 of the issued notice under section 148 of the Act on 15/09/2016, on 15/09/2016, which was duly served upon the assessee. Subsequently which was duly served upon the assessee. Subsequently which was duly served upon the assessee. Subsequently, statutory notices for completing scrutiny proceedings were issued and notices for completing scrutiny proceedings were issued and notices for completing scrutiny proceedings were issued and complied with. In the reassessment proceedings order complied with. In the reassessment proceedings order complied with. In the reassessment proceedings order under section 147 read with section 143(3) of the 147 read with section 143(3) of the Act dated 28/12/2017, the dated 28/12/2017, the Assessing Officer rejected the claim of the assessee of long rejected the claim of the assessee of long rejected the claim of the assessee of long-term capital gain of ₹1,67, 67,45,253/- on sale of shares of M/s Matra on sale of shares of M/s Matra Kaushlya Enterprises Ltd (MKEL), whi Kaushlya Enterprises Ltd (MKEL), which was claimed ch was claimed by the assessee as exempt under section 10(38) of the s exempt under section 10(38) of the Act Act and held the

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same as unexplained taxable income same as unexplained taxable income in terms of section 68 of the in terms of section 68 of the Act and also added and also added alleged commission paid for obtaining paid for obtaining accommodation entry, which was held unexplained expenditure accommodation entry, which was held unexplained expenditure accommodation entry, which was held unexplained expenditure at the rate of the 2% under section 6 2% under section 69C of the Act. The relevant part of . The relevant part of the assessment order is reproduced as under: the assessment order is reproduced as under:

“15. Thus, considering the findings of the search/ survey, inquiries Thus, considering the findings of the search/ survey, inquiries Thus, considering the findings of the search/ survey, inquiries conducted in the case of brokers, operators, entry providers and exit conducted in the case of brokers, operators, entry providers and exit conducted in the case of brokers, operators, entry providers and exit providers and on the basis of the SEBI and NSE findings, the nature of oviders and on the basis of the SEBI and NSE findings, the nature of oviders and on the basis of the SEBI and NSE findings, the nature of transaction entered into by the asssessee for receiving LTCG in respect transaction entered into by the asssessee for receiving LTCG in respect transaction entered into by the asssessee for receiving LTCG in respect of shares of M/s MKEL and the exemption claimed us 10(38) of the IT. of shares of M/s MKEL and the exemption claimed us 10(38) of the IT. of shares of M/s MKEL and the exemption claimed us 10(38) of the IT. Act, 1961 are not allowed. Since, these transa Act, 1961 are not allowed. Since, these transactions are not treated as ctions are not treated as genuine and not resulting in a genuine capital gains, hence, the sale genuine and not resulting in a genuine capital gains, hence, the sale genuine and not resulting in a genuine capital gains, hence, the sale proceeds received by the assessee of Rs. 1,67,70,454/ proceeds received by the assessee of Rs. 1,67,70,454/- on shares of M/s. on shares of M/s. MKEL is treated as unexplained taxable income earned during the year MKEL is treated as unexplained taxable income earned during the year MKEL is treated as unexplained taxable income earned during the year and accordingly, a and accordingly, added under section 68 of the IT. Act, 1961 to the total dded under section 68 of the IT. Act, 1961 to the total income of the assessee during the relevant Year under consideration. income of the assessee during the relevant Year under consideration. income of the assessee during the relevant Year under consideration. Further, an amount of Further, an amount of ₹3,35,409/- i.e. 2% of i.e. 2% of ₹1,67,70,454/- (commission paid to the entry provider/operator) is being added to the (commission paid to the entry provider/operator) is being added to the (commission paid to the entry provider/operator) is being added to the total income of the assessee us 69C of IT Act, 1961 on account of total income of the assessee us 69C of IT Act, 1961 on account of total income of the assessee us 69C of IT Act, 1961 on account of unexplained expenditure. Penalty proceeding u/s. 271(1)(c) are unexplained expenditure. Penalty proceeding u/s. 271(1)(c) are unexplained expenditure. Penalty proceeding u/s. 271(1)(c) are separately initiated for furnishing inaccurate particulars of income separately initiated for furnishing inaccurate particulars of income separately initiated for furnishing inaccurate particulars of income leading to evasion of tax. leading to evasion of tax.” 4. The Ld. CIT(A) also upheld Ld. CIT(A) also upheld the addition observing as under: the addition observing as under:

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“5.7 CONCLUSION CONCLUSION

To reiterate, the facts of the case, as at para 5.4 and 5.5 supra, 30,000 To reiterate, the facts of the case, as at para 5.4 and 5.5 supra, 30,000 To reiterate, the facts of the case, as at para 5.4 and 5.5 supra, 30,000 shares of Matra Kaushalya Enterprise Ltd were acquired from Pranjal shares of Matra Kaushalya Enterprise Ltd were acquired from Pranjal shares of Matra Kaushalya Enterprise Ltd were acquired from Pranjal Trading Co P Ltd; purchase invoice of Kaushalya Global was Trading Co P Ltd; purchase invoice of Kaushalya Global was Trading Co P Ltd; purchase invoice of Kaushalya Global was furnished on 26.11.2012 for face value of Rs for 30000 shares for Rs 3,00,000/ for 30000 shares for Rs 3,00,000/- on 26.11.2012 for face value of Rs 10/- per share. Appellant has furnished a copy of purchase invoice at pp per share. Appellant has furnished a copy of purchase invoice at pp per share. Appellant has furnished a copy of purchase invoice at pp 29 of paper book. This is clearly an off market transaction. The demat 29 of paper book. This is clearly an off market transaction. The demat 29 of paper book. This is clearly an off market transaction. The demat account was credited with 30,000 account was credited with 30,000 shares on 13.12.2012.

The appellant has furnished contract notes for sale of Matra Kaushalya The appellant has furnished contract notes for sale of Matra Kaushalya The appellant has furnished contract notes for sale of Matra Kaushalya Enterprise Ltd through Dhwaja Shares & Securities Pvt Ltd from Enterprise Ltd through Dhwaja Shares & Securities Pvt Ltd from Enterprise Ltd through Dhwaja Shares & Securities Pvt Ltd from 21.01.2014 to 29.01.2014 for 1,67,70,453/ 21.01.2014 to 29.01.2014 for 1,67,70,453/-where the sale price per where the sale price per share is approximately Rs. 558/ share is approximately Rs. 558/-; the bank statement at pp 38 of the PB ; the bank statement at pp 38 of the PB of bank account in Bank of Baroda where the appellant has highlighted of bank account in Bank of Baroda where the appellant has highlighted of bank account in Bank of Baroda where the appellant has highlighted Rs. 55,29,416, Rs. 49,38,584, Rs.52,42,363 received on 28.01.2014, Rs. 55,29,416, Rs. 49,38,584, Rs.52,42,363 received on 28.01.2014, Rs. 55,29,416, Rs. 49,38,584, Rs.52,42,363 received on 28.01.2014, 29.01.2014 and 30.01.2014 respectively from Dhwaja Shares & 29.01.2014 and 30.01.2014 respectively from Dhwaja Shares & 29.01.2014 and 30.01.2014 respectively from Dhwaja Shares & Securities Pvt Ltd Securities Pvt Ltd reveals that the total is Rs 1,57,10,363/ reveals that the total is Rs 1,57,10,363/-. The demat account of appellant in Indusind Bank at pp 39 of the paper reveals that account of appellant in Indusind Bank at pp 39 of the paper reveals that account of appellant in Indusind Bank at pp 39 of the paper reveals that 30000 shares of Matra Kaushalya Enterprises Ltd was debited on 30000 shares of Matra Kaushalya Enterprises Ltd was debited on 30000 shares of Matra Kaushalya Enterprises Ltd was debited on 21.01.2014 - this is strange as the last sale took place on 29.01. this is strange as the last sale took place on 29.01.2014. this is strange as the last sale took place on 29.01. These are placed at Annexure. These are placed at Annexure.

This transaction of purchase is an off This transaction of purchase is an off - market transaction. The sale is market transaction. The sale is debited in the demat account prior to the sale which is purportedly debited in the demat account prior to the sale which is purportedly debited in the demat account prior to the sale which is purportedly through the stock exchange. There is a spectacular gain in price from Rs. through the stock exchange. There is a spectacular gain in price from Rs. through the stock exchange. There is a spectacular gain in price from Rs. 10/-per share to Rs. 558/560 per share. In the light of the afore cited er share to Rs. 558/560 per share. In the light of the afore cited er share to Rs. 558/560 per share. In the light of the afore cited decisions and the sale being post decisions and the sale being post -debit of demat account being debit of demat account being improbable, the action ofthe Ld AO in holding the transaction to be improbable, the action ofthe Ld AO in holding the transaction to be improbable, the action ofthe Ld AO in holding the transaction to be bogus is upheld. The addition on account of commission on bogus is upheld. The addition on account of commission on bogus is upheld. The addition on account of commission on the

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accommodation entry @ 2 percent is reasonable and is upheld. accommodation entry @ 2 percent is reasonable and is upheld. accommodation entry @ 2 percent is reasonable and is upheld. Accordingly, grounds of appeal no 1 and 2 are dismissed. Accordingly, grounds of appeal no 1 and 2 are dismissed.” 5. Before us, the Ld. Ld. Counsel of the assessee filed a paperbook of the assessee filed a paperbook containing pages 1 to 182 in support of grounds raised on merit of containing pages 1 to 182 in support of grounds raised on merit of containing pages 1 to 182 in support of grounds raised on merit of addition. He has also filed another paperbook containing pages 1 to ddition. He has also filed another paperbook containing pages 1 to ddition. He has also filed another paperbook containing pages 1 to 54 in support of additional round raised challenging the validity of 54 in support of additional round raised challenging the validity of 54 in support of additional round raised challenging the validity of the reassessment proceedings. the reassessment proceedings.

(a) There is a lack of application of the mind by the is a lack of application of the mind by the is a lack of application of the mind by the Assessing Officer while recording reasons while recording reasons;

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In the reasons recorded the reasons recorded, the Assessing Officer Assessing Officer has noted that assessee had not disclose assessee had not disclosed the receipt of ₹1,67,70, 1,67,70,454/- on sale of shares of MKEL and had also not filed return of sale of shares of MKEL and had also not filed r sale of shares of MKEL and had also not filed r income (regular) for the year under consideration, whereas income (regular) for the year under consideration, whereas income (regular) for the year under consideration, whereas the assessee not only file the assessee not only filed original return of return of income on 28/03/2016 but also duly shown the income on sale of 28/03/2016 but also duly shown the income on sale of 28/03/2016 but also duly shown the income on sale of shares of MKEL under the head KEL under the head ‘income from long income from long-term capital gain’. Therefore, ’. Therefore, the Assessing Officer Assessing Officer did not apply his mind while recording reasons his mind while recording reasons and thus, and thus, notice issued under section 148 of the under section 148 of the Act and consequent assessment is and consequent assessment is bad in law and deserve to be quashed. bad in law and deserve to be quashed. (b) There is no live link of the material relied upon and belief There is no live link of the material relied upon and belief There is no live link of the material relied upon and belief formed thereupon thereupon: (i) The Assessing Officer Assessing Officer recorded that information was recorded that information was received that received that ‘SEBI’ has suspended trading in shares of has suspended trading in shares of several penny stock companies consequent to its several penny stock companies consequent to its several penny stock companies consequent to its

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investigation investigation, but, nowhere stated that trading in shares , but, nowhere stated that trading in shares of ‘MKEL’ were suspended by the SEBI. The trading were suspended by the SEBI. The trading suspended in other shares is not relevant material for suspended in other shares is not relevant material for suspended in other shares is not relevant material for forming belief in the case of the assessee. During the forming belief in the case of the assessee. During the forming belief in the case of the assessee. During the course of the reassessment proceeding also no such course of the reassessment proceeding also no such course of the reassessment proceeding also no such material indicating suspension of trading in shares of material indicating suspension of trading in shares of material indicating suspension of trading in shares of ‘MKEL’ by ‘ ‘SEBI’ has been provided to the assessee. has been provided to the assessee. (ii) In the reasons recorded it is mentioned that information In the reasons recorded it is mentioned that information In the reasons recorded it is mentioned that information was received from directorate of investigation, was received from directorate of investigation, was received from directorate of investigation, Kolkata based on search/ based on search/survey on the premises of certain premises of certain operators/intermediaries/beneficiaries operators/intermediaries/beneficiaries and found that and found that long-term capital gain LTCG or long term capital gain LTCG or long-term capital loss term capital loss (LTCL) was was provided was provided provided to to beneficiaries to beneficiaries beneficiaries by way of by by way of way of accommodation entries. But in the material supplied by the accommodation entries. But in the material supplied by the accommodation entries. But in the material supplied by the investigation, name of the assessee is not appearing. The investigation, name of the assessee is not appearing. The investigation, name of the assessee is not appearing. The information under refer information under reference including the statement of ence including the statement of

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alleged operators or intermediaries or beneficiaries for alleged operators or intermediaries or beneficiaries for alleged operators or intermediaries or beneficiaries for brokers have never been provided to the assessee. brokers have never been provided to the assessee. brokers have never been provided to the assessee. (c) Reasons recorded based on suspicion Reasons recorded based on suspicion The Assessing Officer Assessing Officer in Para 5 of the assessment order has of the assessment order has mentioned that quantum of long mentioned that quantum of long-term capital gain in the term capital gain in the case of the assessee was found suspicious and therefore case of the assessee was found suspicious and therefore case of the assessee was found suspicious and therefore detailed investigation was undertaken ( investigation was undertaken (i.e. by i.e. by way of reopening the assessment) applying various tools of reopening the assessment) applying various tools of reopening the assessment) applying various tools of Income-tax Department Department data, BSE data, data, BSE data, money control website etc.

6.1 The Ld. Counsel Counsel of in support of his contention that of in support of his contention that assessment cannot be reopened merely on cannot be reopened merely on reason to suspect, reason to suspect, relied on the decision in the case of decision in the case of Coronation Agro industries Ltd Vs DCIT Coronation Agro industries Ltd Vs DCIT Writ Petition No. 2627 of 2016 No. 2627 of 2016. He also referred to the decision of . He also referred to the decision of the Hon’ble Bombay Bombay High Court in the case of PCIT v. Shodiman PCIT v. Shodiman Investments P. Ltd. (ITA No. 1297 of 2015 Investments P. Ltd. (ITA No. 1297 of 2015) ), wherein the

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reassessment proceedings based on the reason to suspect was held reassessment proceedings based on the reason to suspect was held reassessment proceedings based on the reason to suspect was held invalid.

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submitted that reassessment proceeding have been validly initiated submitted that reassessment proceeding have been validly initiated submitted that reassessment proceeding have been validly initiated in the case of the assessee. in the case of the assessee.

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informed that all such b informed that all such brokers through whom such transaction were rokers through whom such transaction were carried out, admitted that they charged commission on the amount carried out, admitted that they charged commission on the amount carried out, admitted that they charged commission on the amount involved in these transactions. It was also informed that the assessee has involved in these transactions. It was also informed that the assessee has involved in these transactions. It was also informed that the assessee has traded in the shares of penny stock companies to generate bogus LTCG traded in the shares of penny stock companies to generate bogus LTCG traded in the shares of penny stock companies to generate bogus LTCG income and thereby converted undisclosed income into tax free income e and thereby converted undisclosed income into tax free income e and thereby converted undisclosed income into tax free income without paying taxes. Information was received that the SEBI has without paying taxes. Information was received that the SEBI has without paying taxes. Information was received that the SEBI has suspended trading in shares of several penny stock companies consequent suspended trading in shares of several penny stock companies consequent suspended trading in shares of several penny stock companies consequent to its investigation. The Investigation Wing Kolkata ha to its investigation. The Investigation Wing Kolkata had carried search d carried search action u/s 132 and survey action u/s 133A of the I.T. Act on various action u/s 132 and survey action u/s 133A of the I.T. Act on various action u/s 132 and survey action u/s 133A of the I.T. Act on various operators who were indulging in trading in shares of penny stock operators who were indulging in trading in shares of penny stock operators who were indulging in trading in shares of penny stock companies. It was found during the search and survey that the operator companies. It was found during the search and survey that the operator companies. It was found during the search and survey that the operator were artificially rigging the pric were artificially rigging the prices of several such companies for the es of several such companies for the purpose of giving accommodation entries in the form of long term capital purpose of giving accommodation entries in the form of long term capital purpose of giving accommodation entries in the form of long term capital gains against equivalent amount of cash after deducting their commission. gains against equivalent amount of cash after deducting their commission. gains against equivalent amount of cash after deducting their commission. The list of such companies included the penny stock company M/s Matra The list of such companies included the penny stock company M/s Matra The list of such companies included the penny stock company M/s Matra Kaushal Enterprises Ltd. (MKEL). ushal Enterprises Ltd. (MKEL). 3. As per the information available on record, the assessee sold shares the As per the information available on record, the assessee sold shares the As per the information available on record, the assessee sold shares the penny stock company M/s MKEL penny stock company M/s MKEL ₹1,67,70,454/-. The assesesse has not . The assesesse has not disclosed the receipt and has not filed the return of income. disclosed the receipt and has not filed the return of income. 4. The company M/s MKEL h The company M/s MKEL had losses for the year ending 2011, 2012 and ad losses for the year ending 2011, 2012 and 2013. Thus its performance did not command any substantial increase in 2013. Thus its performance did not command any substantial increase in 2013. Thus its performance did not command any substantial increase in prices short period. In view of all the above facts, the amount received by prices short period. In view of all the above facts, the amount received by prices short period. In view of all the above facts, the amount received by the assessee is unexplained. the assessee is unexplained. 5. On the basis of the aforesaid info On the basis of the aforesaid information available with me and after duly rmation available with me and after duly applying my mind, I have reasons to believe that income chargeable to tax applying my mind, I have reasons to believe that income chargeable to tax applying my mind, I have reasons to believe that income chargeable to tax of ₹1,67,70,454/- - has escaped assessment for AY 2014-15 within the 15 within the meaning of section 147 of the I.T. Act, 1961. Accordingly, the case is meaning of section 147 of the I.T. Act, 1961. Accordingly, the case is meaning of section 147 of the I.T. Act, 1961. Accordingly, the case is reopened u/s 147 of the I.T. Act, 1961 for AY 2014 pened u/s 147 of the I.T. Act, 1961 for AY 2014-15.

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8.1 Firstly, the assessee has challenged the validity of the Firstly, the assessee has challenged the validity of the Firstly, the assessee has challenged the validity of the reassessment proceeding on the ground of nonapplication of the reassessment proceeding on the ground of nonapplication of the reassessment proceeding on the ground of nonapplication of the mind by the Assessing Officer Assessing Officer while recording reasons to believe while recording reasons to believe that income escaped assessment. We find that the income escaped assessment. We find that the Assessing Officer Assessing Officer in Para 3 of the reasons recorded has noted that the assessee has not of the reasons recorded has noted that the assessee has not of the reasons recorded has noted that the assessee has not disclosed the receipt of the receipt of ₹1,67,70,454/- and has not filed the return and has not filed the return of income, whereas before us the assessee has filed a of income, whereas before us the assessee has filed a of income, whereas before us the assessee has filed a copy of return of income filed under provision of section 139 of the of income filed under provision of section 139 of the of income filed under provision of section 139 of the Act. The Assessing Officer in the assessment order has also recorded the fact in the assessment order has also recorded the fact in the assessment order has also recorded the fact of filing of regular return of income by the assessee on 23/03/2016. of filing of regular return of income by the assessee on 23/03/2016. of filing of regular return of income by the assessee on 23/03/2016. In the said return of income In the said return of income, the assessee has declared the receipt ee has declared the receipt on sale of the shares amounting to on sale of the shares amounting to ₹1,67,45,253/- under the head long-term capital gain and claim term capital gain and claimed the same as exempt. Therefore, the same as exempt. Therefore, the Assessing Officer Assessing Officer has recorded reasons to believe based on has recorded reasons to believe based on incorrect facts merely on the basi incorrect facts merely on the basis of the information received and s of the information received and without verifying the same from the record available with him. without verifying the same from the record available with him. without verifying the same from the record available with him. It

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makes clear that there is a total non makes clear that there is a total non-application of mind on the part application of mind on the part of the AO while recording the reasons for reopening of the of the AO while recording the reasons for reopening of the of the AO while recording the reasons for reopening of the assessment. In the case of In the case of CIT v. G & G Pharma (2015) 384 ITR CIT v. G & G Pharma (2015) 384 ITR 147 (Del), the Hon’ble Delhi High Court held that the AO should , the Hon’ble Delhi High Court held that the AO should , the Hon’ble Delhi High Court held that the AO should apply his mind in order to form reasons to believe that income has apply his mind in order to form reasons to believe that income has apply his mind in order to form reasons to believe that income has escaped assessment, is one of the basic requirement of section 147 escaped assessment, is one of the basic requirement of section 147 escaped assessment, is one of the basic requirement of section 147 of the Act.

8.2 Secondly, we find that the we find that the Assessing Officer has referred to suspension of trading in some shares by the suspension of trading in some shares by the Security and Security and Exchange Board of India (SEBI), but nowhere pointed out whether any trading Board of India (SEBI), but nowhere pointed out whether any trading Board of India (SEBI), but nowhere pointed out whether any trading in the shares of the MKEL was ever suspended. Suspension of in the shares of the MKEL was ever suspended. Suspension of in the shares of the MKEL was ever suspended. Suspension of trading in the shares other than ing in the shares other than MKEL is not relevant for making MKEL is not relevant for making belief that income escaped escaped assessment in the case of the assessee in the case of the assessee. The Hon’ble Supreme Court in the case of The Hon’ble Supreme Court in the case of Rajesh Jhaveri Rajesh Jhaveri Stock Brokers Private limited Private limited 291 ITR 500 (SC), held that eld that at the stage of issue of notice, the question is whether there was relevant material issue of notice, the question is whether there was relevant material issue of notice, the question is whether there was relevant material

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on which a reasonable person c on which a reasonable person could have formed a requisite ould have formed a requisite belief that income escaped assessment. that income escaped assessment. But, in the present case the in the present case the information referred that SEBI suspended trading in some penny information referred that SEBI suspended trading in some penny information referred that SEBI suspended trading in some penny stock shares is not relevant for forming belief that income arising stock shares is not relevant for forming belief that income arising stock shares is not relevant for forming belief that income arising from sale of shares of MKEL has escaped assessment. from sale of shares of MKEL has escaped assessment. from sale of shares of MKEL has escaped assessment.

8.3 Thirdly, the Assessing Officer Assessing Officer in assessment order has in assessment order has recorded that case was reopened in view of the suspicion that recorded that case was reopened in view of the suspicion that recorded that case was reopened in view of the suspicion that income escaped assessment assessment and therefore wanted detailed and therefore wanted detailed investigation. The relevant finding of the . The relevant finding of the Assessing Officer Assessing Officer is reproduced as under: reproduced as under:

“5. Suspicion of Revenue Suspicion of Revenue 5.1 The assessee earned long term capital gain in the current year and 1 The assessee earned long term capital gain in the current year and 1 The assessee earned long term capital gain in the current year and claimed it as exempt u/s 10(38) of the act. This quantum of huge long claimed it as exempt u/s 10(38) of the act. This quantum of huge long claimed it as exempt u/s 10(38) of the act. This quantum of huge long term capital gainwas found suspicious and detailed investigation of this term capital gainwas found suspicious and detailed investigation of this term capital gainwas found suspicious and detailed investigation of this issue was undertaken. Various tools availabl issue was undertaken. Various tools available were examined including e were examined including ITD data, BSE data, money control website, taxman, court rulings, internet ITD data, BSE data, money control website, taxman, court rulings, internet ITD data, BSE data, money control website, taxman, court rulings, internet as well as investigation wing report and findings of the SEBI. as well as investigation wing report and findings of the SEBI.” ”

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8.4 It is evident that the is evident that the Assessing Officer is referring to the is referring to the reasons recorded where he fo reasons recorded where he found the long-term capital gain a term capital gain as suspicious and thereafter he is referring to the suspicious and thereafter he is referring to the detailed detailed investigation undertaken by him, where where he has referred to various tools including he has referred to various tools including Income-tax Department Department data, BSE data, money control website, ata, money control website, taxman, court rulings Internet as well as investigation wing report taxman, court rulings Internet as well as investigation wing report taxman, court rulings Internet as well as investigation wing report and finding of the SEBI SEBI. Thus, the contention of the . Thus, the contention of the Ld. DR that Assessing Officer has referred to the suspicion before carrying out has referred to the suspicion before carrying out has referred to the suspicion before carrying out investigation by the investigation by the Investigation Wing, is not born is not borne out of above factual position and therefore same is rejected. factual position and therefore same is rejected.

8.5 The Ld. Counsel Counsel relied on the decision of the Hon’ble Bombay relied on the decision of the Hon’ble Bombay High Court in the case of Coronation Agro industries Ltd (supra), High Court in the case of Coronation Agro industries Ltd (supra), High Court in the case of Coronation Agro industries Ltd (supra), wherein Hon’ble High Court has held wherein Hon’ble High Court has held that reassessment proceeding that reassessment proceeding based on reason to suspect cannot based on reason to suspect cannot be valid. The relevant finding of valid. The relevant finding of the Hon’ble High Court is reproduced as under: the Hon’ble High Court is reproduced as under:

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“4. We note that the reasons in support of the impugned notice 4. We note that the reasons in support of the impugned notice 4. We note that the reasons in support of the impugned notice accept the fact that as a matter of regular accept the fact that as a matter of regular business practice, a business practice, a broker in the stock exchange makes modifications in the client code broker in the stock exchange makes modifications in the client code broker in the stock exchange makes modifications in the client code on sale and/ or purchase of any securities, after the trading is over on sale and/ or purchase of any securities, after the trading is over on sale and/ or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching so as to rectify any error which may have occurred while punching so as to rectify any error which may have occurred while punching the orders. The reasons do not the orders. The reasons do not indicate the basis for the Assessing indicate the basis for the Assessing Officer to come to reasons do not indicate the basis for the Assessing Officer to come to reasons do not indicate the basis for the Assessing Officer to come to reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any Officer to come to reasonable belief that there has been any Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in escapement of income on the ground that the modifications done in escapement of income on the ground that the modifications done in the client code was n the client code was not on account of a genuine error, originally ot on account of a genuine error, originally occurred while punching the trade. The material available is that occurred while punching the trade. The material available is that occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker but there is a client code modification done by the Assessee's broker but there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape there is no link from there to conclude that it was done to escape there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a nt of a part of its income. Prima facie, this appears to be a nt of a part of its income. Prima facie, this appears to be a case of reason to suspect and not reason to believe that income case of reason to suspect and not reason to believe that income case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. chargeable to tax has escaped assessment.

8.6 Similarly the Tribunal Delhi bench in decision dated Delhi bench in decision dated 29/09/2021 the case o the case of Dove Consultants Pvt. Ltd. Vs DCITITA Dove Consultants Pvt. Ltd. Vs DCITITA No. 1197/Del/2019 No. 1197/Del/2019 for Assessment Year 2009 2009-10 held that reopening has to be based on the reliable material and not on the reopening has to be based on the reliable material and not on the reopening has to be based on the reliable material and not on the

Ashok Jasraj Jain, HUF 18 ITA No. 5609/M/2019

basis of reason to suspect basis of reason to suspect, accordingly, the Tribunal Tribunal quashed the reassessment proceeding. reassessment proceeding.

8.7 Similarly, Hon’ble Bombay High Court Hon’ble Bombay High Court in judg in judgment dated 16/04/2018 in the case of case of PCIT Vs M/s. Shodiman Investments PCIT Vs M/s. Shodiman Investments Pvt. Ltd. (Bombay High Court) Pvt. Ltd. (Bombay High Court) in Income Tax ITA. in Income Tax ITA. 1297 of 2015 Assessment Year 2003 2003-04 held that reassessment proceeding eld that reassessment proceeding cannot be initiated based on suspicious transactions in the bank cannot be initiated based on suspicious transactions in the bank cannot be initiated based on suspicious transactions in the bank account of Mahasagar account of Mahasagar Securities Ltd.

8.8 In the instant case also according to the In the instant case also according to the Assessing Officer Assessing Officer he found the long term capital gain declared by the assessee found the long term capital gain declared by the assessee found the long term capital gain declared by the assessee as suspicious transactions and not as reliable i suspicious transactions and not as reliable information and for nformation and for ascertaining, he needed the investigation. In our opinion, in view of , he needed the investigation. In our opinion, in view of , he needed the investigation. In our opinion, in view of the decision of the Hon’ble the decision of the Hon’ble Bombay High Court in the case of Bombay High Court in the case of Shodiman Investments P. Ltd. (supra) Shodiman Investments P. Ltd. (supra) cited above, the cited above, the Assessing Officer is not permitte is not permitted to reopen assessment based on the reason based on the reason to suspicion.

Ashok Jasraj Jain, HUF 19 ITA No. 5609/M/2019

8.9 In view of above discussion In view of above discussion, the reassessment proceeding the reassessment proceedings completed in the case of the assessee are held to be invalid and completed in the case of the assessee are held to be invalid and completed in the case of the assessee are held to be invalid and accordingly same are quashed. The additional ground accordingly same are quashed. The additional ground accordingly same are quashed. The additional ground raised by the assessee is allowed.

8.10 Since, we have already Since, we have already quashed the reassessment proceeding, the reassessment proceeding, the arguments raised by the parties on the merit of the addition are the arguments raised by the parties on the merit of the addition are the arguments raised by the parties on the merit of the addition are rendered academic, and rendered academic, and therefore, we’re not adjudicating adjudicating upon same.

Order pronounced in the ounced in the open Court in 31/10 10/2022. Sd/- Sd/- - (KULDIP SINGH KULDIP SINGH) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/10/2022 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT

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