NARAYAN SUPPLIERS PVT. LTD.,KOLKATA vs. I.T.O., WARD - 6(3), KOLKATA, KOLKATA

O R D E R

Per George Mathan, JM:

3 ITANo.1077/Kol/2024 5. It was the submission that the Assessing Officer dee med the said transaction by the assessee as penny stock transaction and has made the addition of the entire purchases of the shares. The Assessing Officer failed to appreciate that this was simply trading transaction and no addition was called for. It was further submitted that the said three companies were treated as penny stock companies by the SEBI only vide an order of 2017 while the transaction related to the assessment year 2011-2012. It was the submission that the transactions had been entered into by the assessee as bonafide transaction. It was the submission that no additional evidence has been obtained nor unearthed by the Assessing Officer to treat the transaction as bogus. It was the submission that all the transactions were through recognized stock exchanges. The ld.AR drew our attention to pages 84 to 261, which are the copies of contract note of the share transaction from D.B. & Co. for the impugned assessment year. Here, we should mention that the said contract notes produced are only in respect of M/s JMD Telefilms Industries Limited and the contract note in respect of Unisys and Nouvea Multimedia Limited have not been produced before us. Ld.AR has also filed written submission which read as follows :- Written Submissions before the Hon'ble ITAT- "A" Bench, Kolkata in the case of Narayan Suppliers Pvt. Ltd. vide for Asstt. Yr. 2011-12 fixed for hearing on 18/12/2024 against the order u/s 250 of the I.T. Act, 1961 dated 15/02/2024 passed by Ld. CIT(A), NFAC, Delhi. The fact of the case is that the assessee is a company engaged in the business of investment in shares and securities. The assessee company filed its return of income for the Asstt.Yr. 2011-12 on 28/03/2012 declaring a total income of Rs. NIL. Subsequently, the case of the assessee was re-opened and a notice u/s 148 of the I.T. Act, 1961 was issued to the assessee on 28/03/2018. The assessee duly complied with the aforesaid notice and filed its return of income on 25/04/2018 declaring same total income of Rs. NIL.

4 ITANo.1077/Kol/2024 Subsequently, notices u/s 143(2) and 142(1) were received by the assessee. In response to the aforesaid notices, the A/R of the assessee company appeared from time to time and made submissions. However, the Ld. Assessing Officer passed the assessment order dated 11/12/2018 u/s 147/143(3) of the Income Tax Act, 1961 adding back the entire amount of purchase of shares of penny stocks (as alleged by the Assessing Officer), amounting to Rs. 17,10,95,930/- to the total income of the assessee considering the same as bogus transaction/investment of unaccounted money u/s 269 of the 1.T. Act, 1961. Aggrieved by the aforesaid order, the assessee company filed an appeal in Form 35 before the Ld. CIT(A), NFAC, Delhi. However, the said appeal was dismissed by the Ld. CIT(A), NFAC, Delhi upholding the order of the Assessing Officer, merely relying on some judgements without even considering submissions of the assessee, while the assessee had given the Statement of Facts to Ld. CIT(A), NFAC, Delhi on 11/04/2023 that the 1.T. Act does not allow the Assessing Officer for addition u/s 269 of the I.T. Act, 1961. The order passed by the Assessing Officer u/s 269 of the 1.T. Act, 1961 may kindly be treated as null & void and addition made of Rs. 17,10,95,930/- may kindly be directed to delete. Sir, before embarking upon the Statement of Facts on the Grounds of Appeal already taken, we like to take an Additional Ground of Appeal as under which may kindly be considered and for this act your appellant will remain ever grateful to you. Additional Ground of Appeal For that the Ld. Assessing Officer has erred in law as well on facts of the case by re-opening the assessment on the basis of vague information and vague reasons without any tangible material or independent application of mind but on borrowed satisfaction, suspicion and surmises which is not correct as well as untenable in law. For this ground, it is submitted that the case of the assessee was re- opened simply on the basis of information received from the DDIT (Inv.)-II, Jodhpur. The Assessing Officer while re-opening the assessment has not at all applied his mind but has simply acted on the basis of information of the DDIT (Inv.)-II, Jodhpur. The AO did not even go through the facts of the case of the assessee. Further, it is submitted before your honour that there was no independent verification/enquiry conducted by the AO nor any thoughtful decision given by the Assessing Officer to show that the assessee company purchased bogus share of penny stocks. The assessee company purchased shares but those stocks were not at all treated as Penny Stock by any controlling authority at the point of time of purchase of shares. It is, therefore, clear that there was no lawful application of the mind by the AO on the information received by him nor he has made any 5 ITANo.1077/Kol/2024 enquiry to show that whatever stated in the reasons was believable. The AO in the reasons has stated that the information was received from the Pr. Director of Income Tax (Inv.), Kolkata wherein it has been reported that the assessee company had traded in penny scrip of JMD Telefilms Ltd., Unisys Softwares & Holding Industries Ltd. and Nouveau Multitrade..... amounting to Rs. 17,10,95,930/- during the financial year 2010-11. Reliance on this issue is placed on the following Judicial Pronouncements: Hon'ble Delhi High Court in G&G Pharma 384 ITR 147 which held that "prior to the reopening of the assessment, the AO had to, applying his mind to the materials, conclude that he had reason to believe that income of the assessee had escaped assessment. Unless that basic jurisdictional requirement was satisfied, a post mortem exercise of analysing materials produced subsequent to the re-opening would not rescue an inherently defective reopening order from invalidity Hon'ble Delhi High Court in Meenakshi Overseas 395 ITR 677; where AO solely on the basis of information received from investigation wing concluded that assessce was a beneficiary of entry operators, without further verification, examination or any other exercise and issued notice under section 148. Assessee challenged the notice. Held: "Apparently, reasons to believe did not contain the findings by conclusions of AO one after the other which were at best a reproduction of the conclusion in the investigation report and indeed a I borrowed satisfaction". Delhi High Court in the case of Pr. CIT -VS- RMG Polyvinyl (1) Ltd., (2017) 396 ITR 5 (Del.) in which it was held as under: "Where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, said iriformation could not be said to be tangible material as per se and, thus, reassessment on said basis was not justified." The information from the Investigation Wing was only a cause for suspicion and the assessment cannot be reopened on the basis of suspicion and surmises. Reference is invited to the following judgements: Decision of Hon'ble Punjab & Haryana High Court in the case of CIT -Vs-Anupam Kapoor 299 ITR 179, in which it was held as under: "Held, dismissing the appeal, that there was no material before the Assessing Officer, which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the Assessing Officer merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the 6 ITANo.1077/Kol/2024 Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as well as the Tribunal". Decision of Hon'ble Punjab & Haryana High Court in the case of CIT -Vs-Paramjit Kaur 311 ITR 38, in which it was held as under: "Held, that the Assessing Officer had not examined the information received from the survey circle before 18 recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid." Hon'ble High Court of Guwahati in CIT v. Shiv Shakti Flour Mills Pvt. Ltd. [2010] 327 ITR 430 (Gauhati), Hon'ble Calcutta High Court in Anil Kumar Bhandari v. JCIT [2007] 294 ITR 222 (Calcutta) and the Hon'ble Gujrat High Court in Aayojan Developers v. ITO [2011] 335 ITR 235 (Gujrat) which observed that What transpires from the judicial pronouncements, as discussed above, is that there must be a live link between the materials on which conclusions are based and the actual conclusion of the Assessing Officer information of his belief that any income chargeable to tax has escaped assessment. Such reason must be held in goodfaith and cannot be pretense and also cannot be based on extraneous or irrelevant consideration. Unless the Assessing Officer has "reason to believe" and such reason is material and relevant to form a belief that there is an escaped assessment, no action under section 147 of the Act can be taken. Similarly, in the case of CIT v. Shiv Rattan Soni [2008] 217 CTR 222 (Rajasthan) the Hon'ble High Court observed that If the Reasons recorded before initiating proceeding under s. 148 it need record to find some material which could be related by Court to satisfaction of AO, do not satisfy the test of an honest belief or satisfaction reached by AO about escapement of the income before issuance of notice. It remains an action more on suspicion. Law requires where A 0 has reason to believe and does not rest at his reason to suspect that income of the assessee has escaped assessment. Such a stand cannot be supported on specious plea that one can make a search or enquiry into any material on record which is relevant for the assessment year for holding the belief whether income for particular assessment year has escaped assessment. If that were so, 7 ITANo.1077/Kol/2024 legislature would not have provided an important safeguard against unnecessary harassment that reasons for such belief must be recorded before issuance of notice, and the existence of such satisfaction has to be supported within the parameter of reasons and not outside. One does not have to remember the contents of material that have gone into consideration but material that has gone into consideration must have specific reference so that check on ultra vires exercise of powers can be effectively exercised through judicial review. The Hon'ble Delhi High Court in the case of Commissioner of Income-tax, IV v. Insecticides (India) Ltd [2013] 357 ITR 330 (Delhi) upheld the order of the ITAT Delhi Bench in holding as follows:

17. We may point out at this juncture itself that the Tribunal did not go into the question of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to believe that income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act were invalid.

8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced:- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above-named company was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned? In other words, the contents of the letter dated 16.06.2006 of the Director of Income-tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications For Narayan Suppliers Pvt. Ltd. Director that he had received from the DIT (Inv.), New Delhi; the AO did not 8 ITANo.1077/Kol/2024 mention the facts mentioned in the said communication except that from the information's gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year? The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate sites of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken above."

9 ITANo.1077/Kol/2024 9. We do not see any reason to differ with the view expressed by the Tribunal. No substantial question of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs. The Hon'ble Delhi High Court in the case of Signature Hotels (P) Ltd. vs ITO and another, reported in 338 ITR 51 (Delhi) under similar circumstances held as follows: "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s 143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s 148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: (i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The Assessing Officer must have 'reasons to believe that income chargeable to tax has escaped assessment. This is mandatory and the 'reason to believe' are required to be recorded in writing by the Assessing Officer. (ii) A notice u/s 148 can be quashed if the belief is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer when he recorded the reasons. There should be a link between the reasons and the evidence material available with the Assessing Officer. (iii) The re-assessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs.5 lakhs during F. Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S, For Narayan Suppliers Pvt Ltd. Ah Director was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs.90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to the quashed.

10 ITANo.1077/Kol/2024 In the case of CIT vs Atul Jain reported in 299 ITR 383 it has been held as follows: "Held dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The A.O. did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The A.O. had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the A.O. as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of elieve for issuing a notice. The A.O. had clearly substituted form for substance and therefore the action of the A.0. was not sustainable." (Del-HC): (2010) 325 ITR 0285: CIT v. SFIL Stock Broking Ltd. In the case of SFIL also the AO received information from DIT(INV) and re-opened the assessment. The reasons, as recorded, were as under: "Information received from Dy. Director of IT (Inv), 107, Sushant Lok, Gurgaon vide his letter No. DDIT (Inv)/GGN/02-03/271, dated 17-3- 2003 received in my office on 25-3-2003, that one of my assessee M/s. SFIL Stock Broking Ltd. had made bogus claim of long-term capital gains shown as earned on account of sale/purchase of shares taken through bank account No. CA-3097, Corporation Bank, Karol Bagh, New Delhi in the name of R.K. Agarwal & Co. by obtaining entries for Rs. 6,00,000, Rs. 7,00,000 and Rs. 7,70,000 on 28-2- 1998, 28-2-1998 and 1-3-1998 respectively. He has directed the AO to get notices issued under section 148. Subsequently, I have been directed by the Addl. CIT-R8, New Delhi vide his letter No. Add!. CIT R-8/2002-03/572, dated 26-8-2003 to initiate proceedings under section 148 in respect of cases pertaining to this ward. Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd. on the basis of reasons recorded as above." Revenue relied on the judgement in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SCC). After considering the submissions, The Hon'ble Court held that: "After having heard the counsel for the parties, we are inclined to agree with the submissions made by the respondent/assessee. We find that the Supreme Court in Rajesh Jhaveri (supra) made it absolutely clear that before an assessing officer issues a notice under section 148, thereby re-opening the assessment under section 11 ITANo.1077/Kol/2024 147 of the said Act, he must have formed a belief that income had escaped assessment and that there must be some basis for forming such a belief The Supreme Court made it clear that the basis of such belief could be discerned from the material on record which was available with the assessing officer. However, the Supreme Court in Rajesh Jhaveri (supra) did not say that it was not necessary for the assessing officer to form a belief and that the mere fact that there was some material on-record was sufficient. In the present case, we find that the first sentence of the so-called reasons recorded by the assessing officer is mere information received from the Dy. Director of IT (Inv.). The second sentence is a direction given by the very same Dy. Director of IT (Inv.) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Addl. CIT to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons : Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd. on the basis of reasons recorded as above." From the above, it is clear that the AO referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only the information and the second and the third parts of the beginning para of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the assessing officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration. And the appeal of the department was dismissed." There are plethora of judgements on this issue that if the AO simply proceeds on the basis of information from investigation wing without himself making any enquiry the same is nothing but a borrowed satisfaction. Apart from the cases cited earlier, reference is also invited to the following judgments:-

1. 1. Sandeep Kumar Parsottamhai Patel 2022 137 taxmann.com 373 ITA 8 & 9/SRT/2019 dated 29.11.2021.

2. Harikishan Sundarlal Virmani (Guj High court) 394 ITR 146.

3. Mere information from Investigation Wing alone cannot be reason to initiate re-assessment proceedings as has been held in the case of Future Tech IT Systems Pvt. Ltd. v. ITO (Chand) ITA 543/Chl2019 dated 22.4.2021.

12 ITANo.1077/Kol/2024 4. H. R. Mehta Hon'ble Bombay High Court 387 ITR 561 Held Assessing Officer under duty to supply third party statement and offer cross examination even though assessee has not asked for.

7. Judgement dated 19th November, 2015 In of 2013 (Commissioner of Income Tax-IV v. Independent Media P. Limited).

10. Agya Ram v. CIT (2016) 386 ITR 545 (Del).

11. Rajiv Agarwal v. ACIT (decision dated 16th March, 2016 in Writ Petition (Civil) No. 9659 of2015).

13. CIT v. Multiplex Trading & Industrial Co Ltd (2015) 128 DTR 217 (Del) (HC).

14. CIT vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del.) (HC).

13 ITANo.1077/Kol/2024 19. Where reasons as made available to assessee for reopening assessment merely indicated information received from Director (Investigation) about a particular entity, entering into suspicious transactions and, that material was not further linked by any reason to come to conclusion that assessee had indulged in any activity which could give rise to reason to believe on part of Assessing Officer that income chargeable to tax had escaped assessment, reassessment was an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax had escaped assessment Held, yes in Aventis Pharma Ltd. vs. ACIT (2010) 323 ITR 570.(Bom)(HC).

14 ITANo.1077/Kol/2024 25. In (Principal Commissioner of Income Tax-6 v. Meenakshi Overseas Pvt. Ltd.), this Court discussed the legal position regarding re-opening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under section 143(3) of the Act. The reasons for the re-opening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the Assessing Officer was a "borrowed satisfaction" and at best "a re- production of the conclusion in the investigation report."

, it is submitted before the Ld. Members of the Bench that the Assessing Officer had made addition u/s 269 of the TT. Act, 1961 which does not allow the Assessing Officer for making such addition. The section 269 of the I.T. Act says the definition of High Court. In this chapter High Court means: (i) in relation to any State, the High Court for that State; (ii) in relation to the Union Territory of Delhi, the High Court of Delhi; a)* (iii)**** (iv) in relation to the Union Territory of the Andaman and Nicobar Islands, the High Court at Calcutta; (v) in relation to the Union Territory of Lakshadweep, the High Court of Kerala;

16. ITANo.1077/Kol/2024 a) in relation to the Union Territory of Chandigarh, the High Court of Punjab and Haryana; (vi) in relation to the Union Territories of Dadra and Nagar Haveli and [*] Daman and Diu, the High Court at Bombay; and (vii) in relation to the Union Territory of Pondicherry, the High Court at Madras. Thus, the aforesaid addition made by the Assessing Officer u/s 269 of the I.T. Act, 1961 is not at all as per the law and liable to be deleted. Therefore, we request your good self to be kind enough to direct the Assessing Officer accordingly. Ld. CIT(A), just to dismiss the Ground taken by the appellant, has taken the plea of typographical mistake (para 4.2.3 & para 4.4 of the Appellate Order) committed in the assessment order by the typing clerk. Sir, that is only a lame plea taken by the Ld. CIT(A), NFAC, Delhi. If the fact becomes so, then the Assessing Officer must have taken rectificatory measure within the span of nearly six years. He has passed the assessment order in the month of December 2018. Within this period, he has several times followed the assessment order to meet up different types of official procedures. But the Assessing Officer has not taken such steps. Therefore, it is evident that this is not at all a typographical mistake. It is a dirty trick played by Ld. CIT(A) to materialize the Assessing Officer's ignorance into a mistake just to deceive the appellant. Sir, you will find from the assessment order that so many unethical facts/activities have been noted by the Assessing Officer in the assessment order with whom your appellant is not at all related. Every such remark/comment of the Assessing Officer has been supported by the Ld. CIT(A) not proven by Act or Law but depending on surmises and conjectures. Sir, most of the grounds have been taken by your appellant just to combat the whimsical findings of the Ld. CIT(A) just to support the unlawful addition made by the Assessing Officer. Therefore, your appellant seeks your intervention on such issues while your lawful verdict will reign over the whims and surmises of the Assessing Officer as well as the Ld. CIT(A), NFAC, Delhi. Sir, now coming to the 2nd ground of appeal, your appellant would like to draw your kind attention to the shameless support of the Ld. CIT(A) to the baseless remark of the Assessing Officer as your appellant never earned LTCG or never claimed exemption u/s 10(38) of the I.T. Act, 1961. At page 11 of the assessment order, the Assessing Officer has discussed in the 1 para in regard to generate bogus LTCG or loss on dealing in shares to aid and help beneficiaries to claim exempt income or book losses which could be set off against the genuine income of the business to avoid payment of tax on actual income. But the Assessing Officer failed to correlate the activities his assessée with the stories narrated by him in the assessment order. Because neither his assessee earned Long Term Capital Gain nor his assessee claimed exemption u/s 10(38) of the I.T. Act, 1961. Only his assessee has made investment in the shares of JMD Telefilms

17. ITANo.1077/Kol/2024 Industries Ltd., Unisys Software & Holdings Industries Ltd. and Nouveau Global Ventures Ltd. at that point of time when there was no barring from any higher authority to make transactions with those companies. Therefore, findings of the Assessing Officer that the investment was made for the purpose of claiming bogus LTCG as well as to support the same findings by the Ld. CIT(A) has got no footings at all. Under the circumstances stated above, findings of the Assessing Officer as well as Ld. CIT(A) and addition made on such baseless findings may kindly be treated as unwarranted. Sir, 3rd ground of appeal relates to the pre-conceived mindset of the Ld. CIT(A) for dismissing the appeal filed by your appellant. A plain reading of the assessment order as well as appellate order will reveal that the Assessing Officer has thoroughly discussed on a matter not at all related to your appellant and the Ld. CIT(A), with his pre- conceived mindset, has blindly supported the decisions taken by the Assessing Officer. Thus, the Ld. CIT(A) has deliberately misused his power without objective and lawful application of mind. Both of them was ready to punish your appellant without valid reason to do so. Your appellant has been punished by the Assessing Officer and the same act has been supported blindly by the Ld. CIT(A), NFAC for such a job which has not at all been performed by your appellant or which is not at all related with the performance of your appellant. Sir, 4th ground of appeal has been taken before your honour to highlight the superlative attitude of the Id. CIT(A), Throughout the appellate order u/s 250 dated 15/02/2024, Ld. CIT(A) has always misused his power depending on whims, surmises and arrogance. There is no legal or lawful findings made by the Ld. CIT(A) in the appellate order. His decision only relates to supporting Assessing Officer's addition by unlawful way. At the end of para 4.4.3, the Ld. CIT(A) has remarked, "Since the facts of the case pertaining to Assessing Officer's observation and findings have been discussed in detail above and more further elaborately discussed in the assessment order passed by the Assessing Officer the same are not further repeated to make this appellate order unnecessary elaborate and lengthy while he has spent 33 pages i.e. from page 30 to page 63 of the appellate order para 47 to para 102 of that judicial pronouncement, to describe the judicial pronouncement relating to claim of exemption u/s 10(38) of the Act which does not pertain to your appellant's case. Because your appellant never claimed exemption u/s 10(38) of the 1.T. Act. A careful observation of the appellate order shows that the Ld. CIT(A), NFAC has inherited this throne of Commissioner of Appeal and the taxpayers are the king's subjects. Although for a little while, the Ld. CIT(A) had forgotten that there is also a higher authority than him to deliver justice to the appellant in accordance with I.T. Act or Law. Sir, we solicit justice before your honour. 5th ground of appeal has been raised before your honour to highlight the wrong findings of the Assessing Officer depending on which he has made addition of Rs. 17,10,95,930/- and such findings of the Assessing Officer has been confirmed by the Ld. CIT(A) not 18. ITANo.1077/Kol/2024 supported with legal analysis but supported with whims and arrogance. Because your appellant had invested during financial year 2010-11 and restriction on trading on those shares was imposed by SEBI in the month of Aug, 2017. Sir, then how your appellant will apprehend that after six years trading on these shares will be restricted by any Govt. Authority? Without giving practical thought, the Assessing Officer proceeded to make addition and the 1st appellate authority has tried to give this unlawful addition a proper shape by stating at the last para of page 15 of the appellate order, "The transactions were made at pre-determined price to provide the beneficiary either LTCG/STCL or business loss with the help of share rigging and providing bogus entry. The intention behind transaction in such penny scrip is nothing but a malafide one. The main purpose is to create fabricated Long Term Capital Gain or Short Term Capital Loss or business loss with the help of pre-planned share rigging" - A bogus finding emphasized by the Ld. CIT(A). Because neither your appellant booked LTCG/LTCL nor your appellant booked business loss. Sir, now question arises depending on which evidence both the Assessing Officer and the CIT(A) punished your appellant? Your valuable and lawful verdict will deliver justice to your appellant. Sir, the appellate order dated 15/02/2024 is full of such surprising remarks made by the Assessing Officer which have also been supported by Ld. CIT(A), NFAC, Delhi. As per 6th ground raised by your appellant such a remark is being put forward before your honour which deserves serious consideration. The Assessing Officer, at para 4 of page

2. For Narayan Suppliers Pvt. of page 2 of the assessment order alleged, The main purpose is to create fabricated Long Term Capital Gain or Short Term Capital Loss or business loss with the help of pre-planned share rigging which has also been supported by the Ld. CIT(A), NFAC although both of them have failed to correlate the appellant's activities with the allegation. Sir, your appellant is merely an investor and not the promoter of the share issuing companies. Therefore, rigging of share price is beyond your appellant's capacity. Thus rigging of share price is not at all pre- planned by your appellant but to punish your appellant without any valid reason is pre-planned by the Assessing Officer as well as by the Ld. CIT(A) which is visible throughout the assessment order as well as throughout the appellate order. The Assessing Officer has written the history book of share market gist of which is manipulation in share trading is being done for the purpose of creating fabricated Long Term Capital Gain to claim deduction u/s 10(38) of the Act or Short Term Capital Loss or business loss. But he failed to detect how your appellant is related with the story. It is also beyond the Assessing Officer's as well as the Ld. CIT(A)'s capacity because neither your appellant claimed deduction u/s 10(38) of the Act to adjust the business income nor your appellant claimed short term capital loss but depending on this scenario the Assessing Officer has made addition of Rs. 17,10,95,934/- and the Ld. CIT(A) has wasted page 30 to 63. (para 47 to para 102 of Calcutta High Court's order for addition u/s 68 of the Act) of the assessment order while the Assessing Officer's 19 ITANo.1077/Kol/2024 addition is not at all related with section 68 of the Act. From this type of attitude of both the officers, high-handleness towards your appellant can be easily understood which is the main subject matter of this appeal. In a very recent judgement dated 11/08/2022 in the case of S.R. Cold Storage -Vs- Union of India in Writ Tax No. 723 of 2022, their Lordship Hon'ble Justice Surya Prakash Kesarwani and Hon'ble Justice Jayant Banerjee has noted in Pare 16 at Page 9 regarding a judgement of that court dated 30/05/2022 as "This case prima facia shows high handleness and arbitrary exercises of powers by the respondents including the National Faceless Assessment Centre who are not ready to adhere to the basic principles of law and justice. An addition of Rs. 13,67,24,000/- has been made in the income of the petitioner for the assessment year 2017-18 without there being any material disclosing escapement of income by the petitioner. The petitioner has been continuously bringing it to the notice of the respondents that he has not deposited any amount in his bank account. Bank of Baroda and also filed copy of the bank account, a copy of which has also been filed alongwith supplementary affidavit; and yet the respondents have made addition of Rs.13,67,24,000/-. Basic principles of rule of law and justice has been deliberately denied to the assessee by the respondents. This prima facia shows conscious attempt to cause serious harrassment to the assessee for reasons best known to the respondents. We are frequently coming across order passed by the respondents including the Faceless Assessment Centre which show that the respondents had made up their mind to act arbitrarily and not to adhere to the settled principles of law including natural justice and are passing reassessment orders in a whimsical manner. Such prevailing situation causing serious prejudice to the assessee and the flagrant violation of basic principles of law by the respondents, needs to be arrested at the earliest. Sir, above mentioned facts stated by the Judges are completely marching with this case. The Assessing Officer has passed the assessment order in our case in the manner as stipulated above. So many submissions were made before the Assessing Officer to substantiate our investment. But nothing has been considered by the Assessing Officer as well as Ld. CIT(A) without citing any reason for such non consideration. Only both of them have played the role of story teller of share market but didn't even tried to unveil the role of your appellant with that story. Your appellant is only an investor. Rigging of share price is beyond its capacity. Moreover, neither your appellant enjoyed LTCG/STCL nor your appellant adjusted any other years' business income arisen out of loss in this transaction. Now question arises if both of the higher authority's findings do not match with the activities of your appellant, why this addition has been made? This has been done only to satisfy their whims and conjectures arisen out of tendency of high-handleness.

20 ITANo.1077/Kol/2024 If such type of action has been taken by the Assessing Officer under the dictates of higher authority, this is also beyond the purview of Income Tax Act or Law. In Commissioner of Income Tax, Shimla - Vs- Greenworld Corporation Parwanoo (2009) 7 SCC 69, Hon'ble Supreme Court held that an order passed by quasi-judicial authorities on the dictates of the higher authority is illegal and being without jurisdiction, is a nullity. Hon'ble Supreme Court further held that an Income Tax Officer while sing an order of assessment, perform a quasi-judicial function. Hon'ble Supreme Court further held that it is one thing to say that while making the orders of assessment the Assessing Officer shall be bound by the statutory circulars issued by CBDT but it is another thing to say that the Assessing Authority exercising quasi-judicial function keeping in view the scheme contained in the Act, would lose its independence to pass an independent order of assessment. If the Assessing Officer passes an order at the instance or dictate of the higher authority, it shall be illegal. Sir, in our case probably this has happened. Your valuable verdict will reign over such whimsicality of the Assessing Officer as well the Ld. CIT(A), NFAC. Sir, coming to the 7th ground of appeal raised by your appellant, above stated fact of high-handleness as well as dictates by higher authority will be clear as board-daylight. Sir, we are contesting this appeal legally/lawfully right of which has been given by the law of the land. But the Ld. CIT(A), NFAC, Delhi, bewildered by the power of his chair alongwith dominating strength has termed this right of filing 1 appeal before him, at per para 4.4, page 27 of the appellate order, the appellant is contesting the appeal in a "filthy manner" which shows the Ld. CIT(A)'s pre-conceived mindset with inadequate knowledge in English language as well as inadequate knowledge in Income Tax Judicial Proceedings. Sir, how contesting in 1 appeal can be treated as contesting in a "filthy manner". Probably, only the Ld. CIT(A) will be able to answer this question. Because power of his throne has made him blind. He has crossed every possible way of judiciary platform. Sir, we have not done anything in a filthy manner. But the Ld. CIT(A) has supported the Assessing Officer by dismissing our appeal in a filthy manner. Because, there are also some duties of the Assessing Officer. An assessment completed on mere conjectures, surmises and suspicious is invalid and unsustainable in law. The Assessing Officer has to conduct proceedings without bias. He has to conduct himself in accordance with rules of justice, equity and good consence. Further, the Assessing Officer should proceed independently and conduct the case himself so he is acting in a quasi-judicial authority. That is the essence of our judicial system as decided in plethora of case laws including Umacharan Shaw and Bros. -Vs-CIT (1959)

37. ITR 271 (SC), Dhakeswari Cotton Mills Ltd. -Vs- CIT (1954)

26. ITR 775 (SC) etc. Also the taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is a part of their duty to ensure that no tax which is legitimately due from an assessee should remain 21 ITANo.1077/Kol/2024 un-recovered, they must also, at the same time, not act in a manner as might indicate that scales are weighed against the assessee. It is impossible to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed not to have exercised it in a proper and judicious manner as decided in CIT -Vs- Simon Carves Ltd. (1976) 105 ITR 212 (SC). Sir, whims and conjectures of the Ld. CIT(A) has gone to the peak when he has narrated such addition u/s 269 of the I.T. Act, 1961 as a typographical mistake committed in the assessment order by the typing clerk which is not at all the same. Because after passing this assessment order, the Assessing Officer had several times handled this order by issuing various notices/correspondences to your appellant from the year 2018 till date. But never he thought that this is a mistake apparent from record. If it was so, the Assessing Officer must have issued notice u/s 154 of the 1.T. Act to your appellant to rectify the mistake, if any. But the Assessing Officer was so confident in regard to his performance that he has never tried in the line of rectification. Therefore, we cannot accept the meaningless/pointless effort made by the Ld. CIT(A) just to give support Assessing Officer's unlawful addition as well as to dismiss the appeal filed by your appellant in lawful manner. We solicit your valuable verdict on this legal issue. Sir, now coming to the 9th ground of appeal raised by your appellant, your appellant would like to submit before your honour that the Ld. CIT(A) has tried in so many ways to malice the business activities of your appellant arrogantly. Sir, at para 4.4, page 28 of the appellate order dated 15/02/2024 Ld. CIT(A) has made surprising as well as silly remark, "Such a wrong presumption of the appellant after defrauding the revenue, in no case, can be considered as justified....." is significantly arrogant. Because the Ld. CIT(A) has failed to highlight how the appellant's presumption is wrong and how the appellant has defrauded the revenue. Also, the Ld. CIT(A) has lack of knowledge how to deliver justice to the appellant in legal way. Only he has shown his expertise in arrogantly supporting the unlawful addition by the Assessing Officer Ld. CIT(A)'s as well as Assessing Officer's only intention was to punish your appellant depending on mere surmises, conjectures and suspicions. Both of them had neglected all the norms of accounting system as well as Income Tax Act. Ld. CIT(A) has forgotten that mistake in legal proceedings entails to defeat of the case. Sir, an honest mistake is made unintentionally or unknowingly and without the intention of casing harm. But in our case, an irreparable harm has been made to your appellant by raising a demand of Rs. 10,96,89,220/- to be payable by your appellant. Sir, an assessment may be treated as bad in law when the same has been done purely by making a guess and without evidence which is likely to be set aside as decided in Dhakeswari Cotton Mills Ltd. -Vs- CIT (1954)

26. ITR 775 (SC). In this case also, the Assessing Officer has acted purely on guess work. Because the Assessing Officer's findings "the transactions are not genuine and these connected 22 ITANo.1077/Kol/2024 parties have grossly misused the stock exchange system to generate bogus LTCG or Loss on dealing in shares to aid and help beneficiaries to claim exempt income or book losses which could be set off against the genuine income of the business to avoid payment of tax on actual income" (at 1st para of page 11 of the assessment order) are not at all related with your appellant's business activities as your appellant neither claimed exempt income nor claimed loss on sale of such investments. Therefore, this case also deserves to be set aside. Again, an assessment based on mere conjectures, surmise or suspicion or irrelevant and inadmissible evidence and material is bad and unsustainable in law as per judicial pronouncement in the case of Lalchand Bhagat Ambica Ram -Vs-CIT (1959) 37 ITR 288 (SC). This case has also been disposed off in the manner as stated above which is unsustainable in law. We would also like to submit before your honour that where the Assessing Officer refuses to apply his mind and makes the assessment as he likes, the assessment suffers from arbitrariness and so is bad in law as decided in M. Appukutty -Vs-STO (1966) 17 STC 380 (Ker). Sir this case has been disposed off by the Assessing Officer in the manner as stated above. Therefore, this case may kindly be treated as bad in law. Sir, one more issue we like to highlight before your honour that the Assessing Officer has proved no such fact through documentary evidence that the transaction is sham and coloured. Instead of that, the Assessing Officer simply sat down with folded hands and after submission of requisite details as per Assessing Officer's requisition, he had denied each and every submission of the assessee which was submitted alongwith documentary evidences and the Ld. CIT(A), NFAC had blindly as well as arrogantly supported such unlawful, whimsical and baseless activities of the Assessing Officer not based on substantial evidences, Sir, under the circumstances stated above, before concluding the submission before your honour, we earnestly request your good self to be kind enough to persue the issues highlighted by your appellant with the help of judicial pronouncements applicable to this case as well illogical/illegitimate performances by both the Assessing Officer and the Ld. CIT(A) have also been highlighted by your appellant. In the light of above informations, your appellant submits that the Assessing Officer in the most perfunctory manner and without objective application of mind to the evidence placed on record, proceeded to make addition which has also been supported by the Ld. CIT(A). Your appellant further submits that the assessment order dated 11/12/2018 passed by the Assessing Officer in the most mechanical 23 ITANo.1077/Kol/2024 manner making addition of Rs. 17,10,95,930/- u/s 269 of the I.T. Act, 1961 as well as order u/s 250 dated 15/02/2024 passed by Ld. CIT(A), NFAC, Delhi may kindly be treated as unwarranted so that your valuable verdict reigns over the whims and surmises of both the Assessing Officer and the Ld. CIT(A). And for this act of kindness, your appellant as in duty bound shall ever pray.

6. It was the prayer that the addition as made by the Assessing Officer and as confirmed by the ld. CIT(A) is liable to be deleted.

8. It was then put to the ld.CIT-DR that insofar as the assessee has not claimed exemption u/s.10(38) of the Act, nor has he claimed a loss on account of transaction, how the said trading turnover of the assessee could be treated as the unexplained income of the assessee by applying the 24 ITANo.1077/Kol/2024 provisions of Section 269 of the Act. Ld.CIT-DR submitted that the ld.CIT(A) has corrected the error and it was not Section 269 that is to be referred but the Section is required to be referred u/s.69 of the Act. Ld.CIT-DR also drew our attention to the balance sheet of the assessee placed at page 44 of the paper book which reads as under :-

25 ITANo.1077/Kol/2024 9. It was the submission that this assessee itself is a shell company. The assessee has been showing loss. The assessee has shown reserves and surplus of 7,07,05,000/-. It was the submission that the transaction which have been entered into by the assessee are basically money laundering transaction. It was the submission that the purchases and sales of the shares of the penny stock was done only for the purpose of getting laundered money into its bank account in the form of sale proceeds for further transfer to recipients. It was the submission that the order of the ld.AO and that of the ld.CIT(A) is liable to be upheld.

27 ITANo.1077/Kol/2024 12. Now, the second aspect of this chart is that in the chart filed with the paper book the transaction in respect of JMD Telefilms Industries Limited has newly been introduced in the chart submitted at the time of hearing. Thus, clearly this is a case of money laundering. Though the ld.AO, thus, referred to the money laundering aspect, unfortunately, the revenue is not able to inform us as to the status of such verification and examination. This being so, this Bench invoking its powers u/s.254(1) of the Act, directs the Assessing Officer herewith to intimate the concern authorities being Enforcement Directorate as also the Economic Offences Wing of CBI for examination of the said transaction in its entirety including any and all financial transactions done by this assessee and how and who is involved and connected to the transactions, as also how audit have been done, and to take the matter to its logical conclusion.