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Facts
The assessee did not file the return of income for AY 2015-16. The AO received information regarding bogus accommodation entries and fictitious loans. The AO reopened the case under Section 147 and made additions amounting to Rs. 2,69,67,981/- for unexplained income.
Held
The Tribunal restored the matter to the CIT(A) for de novo adjudication, directing necessary inquiry and verification of documentary evidence. The assessee is to provide all relevant documents. The appeal is allowed for statistical purposes.
Key Issues
Whether the reopening under Section 147 was justified based on information from the investigation wing and if the additions were made without proper inquiry. Whether the CIT(A) erred in dismissing the appeal ex parte.
Sections Cited
147, 148, 69A, 144, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI TR SENTHIL KUMAR
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, vide order dated 15.05.2024 relevant to the Assessment Year 2015-16.
The assessee has raised the following grounds of appeal: 1.1 The appellant is an Individual and mainly earning income from other sources & Capital gains. She had filed not filed his return of income as his income was below taxable limits. Asst. Year : 2015-16 - 2– 1.2 The brief facts are that the AO received information from the investigation wing that a syndicate of Shri Naresh Jain was providing bogus accommodation entries through bogus share transactions. As per the version of the AO, the appellant had dealt in the script of GBFL. which was tagged as penny script. As per the general information received by the AO, it was observed that the appellant had traded in the impugned script. Hence, the AO alleged that the appellant was one of the beneficiaries of such accommodation entries. Therefore, the AO reopened the case of the assessee. 1.3 In fact, the AO has issued the notice u/s 148 mechanically merely relying upon the information received from the investigation wing. The AO never furnished the copy of reasons recorded to the appellant. Therefore, till today, the appellant is not aware about the core reason of reopening. However, on plain reading of the order of assessment, it can be observed that the case of the appellant was reopened for the against the principle of natural justice which deserves to be quashed as it is out of jurisdiction. 2.3 The Ld. CIT(A) has erred in law and/or on facts in not considering the legal position that the reopening cannot be initiated for rowing and fishing inquiry. It is a well settled position of law that provisions of Section 147 cannot be used merely to inquire a transaction. 2.4 That in the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the invocation of the provisions of Section 147 merely because the AO received information from investigation wing. The AO has acted mechanically on the information which is against the principle of law. 3.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the addition of Rs.11,76,828 with regard to share transactions of ACI Infocom Ltd. 3.2 That the Ld. CIT(A) ought not to have upheld addition of Rs. 11,76,828 tagging the script of ACI Infocom Ltd. as penny script without carrying out proper inquiries. 4.1 The Ld. CIT(A) has grievously erred in law and/or on facts in upholding the addition of Rs.1,77,91,153 with regard to alleged accommodation entry. 4.2 The Ld. CIT(A) has failed to appreciate that the appellant has not given any accommodation entry. 4.3 The Ld. CIT(A) ought not to have upheld that the AO had made the addition of Rs. 1,77,91,153 without carrying out proper inquiries or procuring bank statement from the bankers. Asst. Year : 2015-16 - 3– 5.1 The Ld. CIT(A) has grievously erred in law and / or on facts in upholding the addition of Rs.80,00,000 with regard to share transactions of GBFL. 5.2 The Ld. CIT(A) ought not to have upheld the addition of Rs. 80,00,000 tagging the script of GBFL as penny script without carrying out proper inquiries. 5.3 That in the law and/or on facts, the Ld. CIT(A) and/or the AO ought to have procured data from the concerned brokers, banks and relevant parties before concluding the assessment. 6.1 The Ld. CIT(A) has grievously erred in law and/or on facts in upholding the invocation of the provisions of Section 115BBE. 6.2 That in the law and/or on facts, the Ld. CIT(A) ought not to have upheld the invocation of the provisions of Section 115BBE without passing a speaking order and / or granting opportunity of being heard on the invocation of the specific provision. It is therefore prayed that the addition of Rs.2,69,67,981 made by the AO and upheld by the Ld. CIT(A) should be deleted in the interest of natural justice considering the eccentric facts of the case.
Brief facts of the case are that the assessee did not file the Return of Income for A.Y. 2015–16. However, the Department was in possession of information that the assessee had received fictitious profits through trading on BSE in a penny stock namely ACI Infocom Ltd. Therefore, the case was reopened by issuing a notice under section 148 dated 30.03.2021. During the course of assessment proceedings, the Assessing Officer (AO) analyzed the scripts traded by the assessee, namely ACI Infocom Ltd. and GBFL, amounting to Rs. 11,76,828/- and Rs. 80,00,000/- respectively, which remained unexplained by the assessee. Further, the AO noted that the assessee had taken accommodation entries in the form of fictitious loans from bogus entities being run, controlled and managed by Naresh Manek Chand Jain, amounting to Rs. 1,77,91,153/-, which the assessee failed to Asst. Year : 2015-16 - 4– substantiate to the satisfaction of the AO. Accordingly, the AO made a total addition of Rs. 2,69,67,981/- (Rs. 11,76,828 + Rs. 80,00,000 + Rs. 1,77,91,153) as unexplained income under section 69A of the Act and passed the assessment order under section 147 r.w.s. 144 dated 29.03.2022.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). However, the Ld. CIT(A), based on the material available on record, dismissed the appeal of the assessee ex parte.
The Ld. Counsel for the assessee submitted that the Ld. CIT(A) erred in upholding the invocation of the provisions of section 147 merely on the basis of information received from the Investigation Wing. It was submitted that the Assessing Officer acted mechanically on such information, which is against the principles of natural justice. Therefore, it is requested that the assessee be granted an opportunity before the Revenue authorities to produce additional evidence.
On the other hand, the Ld. Departmental Representative supported the orders of the authorities below.
On perusal of the records, it is observed that the assessee was afforded multiple opportunities of hearing to furnish the requisite details, clarifications, and explanations in support of the claim pertaining to financial transactions and the sale and purchase of shares in penny stocks. However, despite being granted multiple opportunities, the assessee failed to furnish the requisite details or explanations before the Ld. CIT(A). Consequently, the Ld. CIT(A), based Asst. Year : 2015-16 - 5– on the material available on record, upheld the action of the Assessing Officer and dismissed the appeal of the assessee ex parte. We further note that, based on the information received from the Investigation Wing, the Assessing Officer alleged that the assessee had entered into transactions relating to the sale of shares, which were treated as bogus transactions. The assessee, however, contended that documentary evidence substantiating the genuineness of the share transaction had been furnished, but the same was not independently verified by the Assessing Officer. Therefore, the Ld. Counsel for the assessee submitted that, given an opportunity, the assessee would produce all necessary details, clarifications, and documentary evidence before the Revenue authorities in support of his claim. In view of the above and in the interest of justice, we restore the matter to the file of Ld. CIT(A) for de novo adjudication, with a direction to conduct necessary inquiry and verify the documentary evidence furnished by the assessee. The assessee shall submit all relevant bank statements, documents, and supporting evidence, and to comply fully with the Revenue authorities without seeking unnecessary adjournments.
In the result, the appeal of the assessee is allowed for statistical purposes.
The order is pronounced in the open Court on 11.03.2026. (TR SENTHIL KUMAR) VICE-PRESIDENT () Ahmedabad; Dated 11.03.2026 MV Asst. Year : 2015-16 - 6–