INCOME TAX OFFICER, WARD 1, JALNA, JALNA vs. ASHISH OMPRAKASH MANTRI, JALNA

The above batch of 8 appeals filed by the Revenue in case of four different assessees for assessment years 2011-12 and 2012-13 respectively are directed against the separate orders dated 29.11.2023 of the Ld.CIT(A), Pune-12. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. for assessment year 2011-12 in case of Ashish Omprakash Mantri as the lead case.

4. Subsequently information was received from the office of the DDIT (Inv.), Unit-8(3), Mumbai that the assessee has sold his investment in penny stocks of M/s. Nivyah Infrastructure & Telecom Services Ltd. (hereinafter referred to as ‘NITSL’) amounting to Rs.1,60,30,716/- during the assessment year under consideration. Further, it was stated that the company NITSL which is a penny stock company, has facilitated various beneficiaries to claim LTCG exempt from tax under section 10(38) of the Act. The assessee was one of the beneficiaries of this penny stock company listed on BSE with Scrip Code 517534. Also it was stated that this company has been used to facilitate introduction of unaccounted income of members or beneficiaries in the form of exempt capital gain or short term capital loss in their books of accounts. The assessee Shri Ashish Omprakash Mantri was one such beneficiary and the amount involved in his case is Rs.1,60,30,716/-.

5. After receiving the above information, the Assessing Officer carried out investigations and found that the share price of the above company i.e. NITSL rose from Rs.39/- on 21.07.2019 to Rs.2,050/- on 05.01.2011 and dipped to Rs.47.20 on 18.07.2012. However, financials of the company for the relevant period did not show any substantial change so as to support such huge share price movement.

The company did not have business to justify the sharp rise in market price of shares. Accordingly, a notice u/s 148 of the Act dated 28.03.2018 was issued to the assessee after recording reasons and taking necessary sanction/approval from the PCIT (Central), Nagpur as per the provisions of section 151 of the Act. In response to the notice u/s 148, the assessee filed the return of income on 20.04.2018 declaring total income at Rs.16,79,227/-. The assessee requested the Assessing Officer to provide reasons for re-opening of the case which were provided to the assessee on 10.05.2018. Further, the assessee vide letter dated 01.06.2018 objected to the reopening of the assessment proceedings u/s 147 of the Act in this case which were rejected by the Assessing Officer by passing a speaking order dated 27.08.2018. Thereafter, notices u/s 143(2) and 142(1) of the Act were issued and served on the assesse in response to which the AR of the assessee appeared before the Assessing Officer and filed various details from time to time justifying the gain of Rs.1,44,35,387/- on sale of shares during the year which had been claimed exempt u/s 10(38) of the Act.

6. Thereafter a show cause notice was issued to the assessee wherein the assessee was requested to give explanation regarding trading of the scrip of penny stock company wherein he has earned bogus LTCG. In response to the show cause notice, the assessee filed the requisite details. However, the Assessing Officer was not satisfied with the submissions made by the assessee. After considering the findings of the search/survey, inquires conducted in the case of assessee, the brokers, operators and the entry providers and the nature of transaction entered into by the assesse, the Assessing Officer disallowed the claim of Long Term Capital Gain of Rs.1,44,35,387/- claimed exempt u/s 10(38) of the Act and added the same under section 68 of the Act.

7. Further, the Assessing Officer held that the accommodation entries regarding sale of shares have been obtained by the assessee after paying certain charges i.e. commission as is the case with all such penny stocks involving accommodation entries in the form of bogus LTCG/STCG. As these charges are not recorded in the books, such commission was presumed @ 2% of the sale amount of Rs.1,60,30,716/-. The amount of commission paid was accordingly arrived at Rs.3,20,614/- and was added as unexplained expenditure u/s 69C of the Act for arranging accommodation entries. The Assessing Officer accordingly passed the order u/s 143(3) r.w.s. 147 of the Act on 24.12.2018 assessing the total income at Rs.1,64,35,230/- by making addition of Rs.1,44,35,387/- on account of disallowance of capital gain u/s 10(38) of the Act and Rs.3,20,614/- on account of unexplained expenditure u/s 69C of the Act.

8. Before the Ld. CIT(A) the assessee apart from challenging the addition on merit, challenged the validity of reopening of assessment u/s 147 of the Act on the ground that in absence of any tangible material, the Assessing Officer cannot reopen the assessment beyond a period of 4 years from the end of the relevant assessment year. It was argued that the original assessment was completed u/s 143(3) r.w.s. 153A of the Act where the impugned transaction has already been considered, therefore, notice for reopening of assessment u/s 148 of the Act for same transaction could not have been issued in absence of any fresh tangible material beyond a period of 4 years.

9. Based on the arguments advanced by the assessee, the Ld. CIT(A) quashed the re-assessment proceedings holding that the notice issued u/s 148 of the Act is not sustainable in law by observing as under: “5.3 I have considered the submissions filed by the appellant. As per the above submission filed by the appellant, it is seen that the learned AO is of the opinion that appellant has not disclosed full and true details w.r.t. exempt LTCG earned on sale of shares of M/s. Nivyah Infrastructure & Telecom Services Ltd. The learned AO has formed the said opinion on the basis of information received from Investigation Wing communicating that M/s. Nivyah Infrastructure & Telecom Services Ltd. is a penny stock listed on the Bombay Stock Exchange and appellant is one of the beneficiary. As per the reasons, information was received from the Investigation Wing regarding the share of M/s. Nivyah Infrastructure & Telecom Services Ltd. However, it is submitted that the appellant has not dealt with shares of M/s. Nivyah Infrastructure & Telecom Services Ltd. In fact appellant has sold shares of M/s. S. V. Electricals Ltd. during AY 2011-12. It was only from 16/03/2012, name of M/s. S. V. Electricals Ltd. was changed to M/s. Nivyah Infrastructure & Telecom Services Ltd. As such, there was no company by the name of M/s Nivyah Infrastructure & Telecom Services Ltd in existence during AY 2011-12 and the learned AO has recorded the reasons merely on the basis of information received from the Investigation Wing. As such, the notice issued u/s 148 of the ITA, 1961 is bad in law. In this regard, the appellant has placed reliance on the recent judgment of the jurisdictional Bombay High Court in the case of South Yarra Holdings Vs. ITO 104 taxmann.com 216. The Honourable Bombay High Court in the said judgement having similar facts has held that the notice u/s 148 of the ITA, 1961 issued is bad in law. Operative Para of the said judgement is reproduced below: "8. From the reasons, it is evident that the impugned notice has been issued on the basis of information received from the Deputy Collector Income Tax (Investigation) alleging that M/s Nivyah Infrastructure & Telecom Services Ltd is a penny stock listed on the Bombay Stock Exchange and that the petitioner had dealt with the same leading to escapement of income. On receipt of information, the least that is expected of the Assessing Officer is to examine the same in the context of the facts of this case and satisfy himself whether the information received does prima facie lead to a reasonable belief that income chargeable to tax has escaped assessment. In this case, the reasons indicate that the Assessing Officer has not carried out such exercise and accepted the report of the Deputy Collector of Income Tax (Investigation) Mumbai to conclude that the petitioner had dealt with Nivyah Infrastructure and Telecom Services Ltd during the previous year relevant to the assessment year 2011-12. Admittedly, there was no company by name "M/s Nivyah Infrastructure & Telecom Services Ltd" in existence during that year for consideration. This clearly shows that the Assessing Officer acted on the satisfaction of the Deputy Collector of Income Tax (Investigation) that income chargeable to tax has escaped assessment. It must also be borne in mind that the impugned notice is issued beyond the period of four years from the end of the relevant assessment year in a case, where the assessment was completed under section 143 (3) of the Act. Therefore, the Assessing Officer would have to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the Assessing Officer would have come to the conclusion that there was no failure to disclose truly and fully all material facts necessary for assessment. Thus, hit by the proviso to section 147 of the Act. However, the Assessing Officer has not applied his mind to the information received in the context of the facts on record The impugned notice is bad-in-law, as it has not been issued by the Assessing Officer on his satisfaction that there is reason to believe, that income chargeable to tax has escaped assessment." 5.4 In the case of the appellant, the above decision of the Hon'ble Bombay High Court squarely applies. In the above circumstances, the impugned notice u/s 148 is not sustainable in law and therefore, is quashed and set aside. Hence, the AO is directed to delete the impugned additions. Thus, the ground raised by the appellant is hereby allowed.”

10. He further noted that the notice issued u/s 148 of the Act was also not valid on the ground that the assessment was completed u/s 143(3) r.w.s. 153A of the Act by accepting the transaction as exempt long term capital gain and the reason for reopening was recorded on the basis of information received from DDIT (Inv.), Mumbai and the notice for reopening of assessment u/s 148 of the Act was issued for the same transaction which was already shown by the assessee in his return of income. The relevant observations of the Ld. CIT(A) read as under: “6.3 I have considered the submissions filed by the appellant. The appellant is placing reliance on the recent judgment of the jurisdictional Bombay High Court in the case of Chanchal Bhagwatilal Gokhru Vs. Union of India [2023] 152 taxmann.com 214. The Honourable Bombay High Court has held that where addition based on penny stock transaction had already been considered while making scrutiny assessment u/s 143(3), notice for reopening u/s 148 for same transaction could not be issued as there was no fresh tangible material. Operative Para of the said judgement is reproduced below: “3. The Petitioner had filed her return of income for AY 2014-15 on 28th July 2014. The Assessing Officer ("AO") had passed an order u/s 143 (3) of the Act on 18th November 2016, whereby he added Rs.1,07,18,922 to the total income on account of withdrawal of exemption claimed by the Petitioner u/s 10(38) of the Act and the Petitioner paid tax on the same. Thereafter, the Petitioner was also granted waiver of penalty for the AY 2014-15 on 31st January 2018 on application u/s 273A of the Act by the PCIT-18, Mumbai.

4. Evidently a notice u/s 148 of the Act dated 26th March 2021 is issued after a period of four years following which a return of income was filed by the Petitioner on 14th April 2021. This was followed by Notice u/s 143(2) dated 10th November 2021 and notice u/s 142(1) dated 15th November 2021 seeking details to which the Petitioner filed a response dated 24th November 2021 and objected to the re-assessment by communication dated 28th January 2022. The objections were disposed of on 11th February 2022. Another notice was issued on 25th February 2022 which led to filing of this Petition.

5. Since the impugned notice u/s 148 of the Act has been issued after the expiry of four years from the end of the relevant AY, Respondents have to show that the jurisdictional requirement is satisfied that there was failure to truly and fully disclose material facts as decided by this Court in Ananta Landmark (P) Ltd v DCIT CC 5(3), Mumbai.

6. We have examined the reasons recorded annexed to the Petition that are evidently premised on 'seen from the assessment records. The Assessment Officer (AO) records that the assessee claimed to have purchased shares of the penny stock scrips for a total of Rs.33,09,976 and sold it for a consideration of Rs.1,15,90,280/-. Therefore he held that the long term capital gain would be unexplained investment/income from other sources and not a capital gain as claimed by the assessee on the premise that entire transaction of purchase and sale of shares were a part of accommodation entry and represents unexplained investment made by assessee in cash to obtain an equivalent amount of bogus profit on sale of shares.

7. We find nothing to indicate failure to disclose any material fact. Upon examining the order u/s 143(3) we find that the AO has considered these very transactions and added 1,07,18,922 to the total income on which the Petitioner has already paid the tax. We find no substance in the AQ's reason to believe that income chargeable to tax has escaped assessment in as much as there is no mention of any tangible material that led to his conclusion. The entire process is triggered on a change of opinion as to the calculation of tax payable by the assesse. As stated hereinabove, it is evident that bald assertions of the transaction being "an accommodation entry made in collusion & connivance with the entry provider" are used to re-open the assessment. It is well settled judicial principal that, the true test of income chargeable to tax escaping assessment is whether there exists fresh "tangible material” on the basis of which appropriate conclusion is reached. In the absence of such material the reassessment proceedings would be invalid. This principle has been upheld by the Apex Court as well as the jurisdictional High Courts in various rulings. Furthermore, this Court has held that reconsideration of the material available at the time of original assessment proceedings tantamount to change of opinion and therefore invalid.

8. In view of the settled legal position and considering the facts of the present case, we pass the following order- i. The impugned notice dated 26th March 2021 issued by Respondent No.2 for AY 2014-15 are quashed and set aside and all action in furtherance thereto is prohibited; ii. Rule made absolute in above terms. No costs 6.4 In the instant case, the above decision of the Hon'ble Bombay High Court squarely applies. The appellant had already declared & claimed the exemption u/s 10(38) in his original return of income. The Assessing Officer had also duly verified the return of income during the course of assessment proceedings and passed order u/s 143(3) r.w.s. 153A of the Act, 1961 by accepting the transaction of exempt LTCG. The reason for reopening was recorded on the basis of information received from DDIT(Inv.) Mumbai and notice for reopening u/s 148 was issued for same tangible transaction, which was already shown by applicant in his return of income. As per above Hon'ble jurisdictional Bombay High Court order in the case of Chanchal Bhagwatilal Gokhru (supra), notice for reopening u/s 148 for same transaction could not be issued as there was no fresh tangible material. Accordingly, even on this count notice u/s 148 of the Act is held to be bad in law Hence, the AO is directed to delete the impugned additions. Therefore, this ground raised by the appellant is hereby allowed.”

1. Whether based on facts and circumstances of the case and on law, the CIT(A), was right in holding that notice u/s 148 of the Act is bad in law.

2. Whether on the fact and circumstances of the case and on law, the CIT(A), was right in deleting the addition by allowing exemption u/s 10(38) of the I.T Act.

“Q.

19. On verification of the Balance Sheets of Atul O Mantri it is seen that Long Term Capital Gains on Sale of Share is credited to Capital Account, the Details are as under A.Y. 2011-12 LTCG of Rs.68,53,275/- A.Y. 2012-13 LTCG of Rs.1,27,24,855/- Please give the details of Capital Gains Earned by him i.e. Name of Asset, Date of Purchase, Cost of Purchase, Date of Sale of Asset, Amount of Sale and copies of Relevant Pass Books. Ans. In A.Y. 2010-11, I have purchase the 2,50,000 shares of Rs.10 each of S.V. Electricals Ltd. Out of the said shares I had sold 42,000 shares for Rs.73,08,000/- in A.Y. 2011-12 and Balance of 2,08,000 shares were sold in A.Y. 2012-13 for Rs.1,48,30,096/-. The capital Gains arising on sale are already reflected in my Balance Sheet. The dates of Sale and Purchase and copies of relevant Pass Books shall be submitted later on. Q.

20. Please furnish the copies of Broker Notes in respect of Purchase and Sale of these Shares and also give the Demat A/c. No. into which these shares were held. Ans:- I will submit the copies of Broker Notes and details of Demat Accounts later on. Q.

5….. 6….. 7. We enclose herewith detail ledger account of Share Charges for the year under assessment. The share expenses of Rs.161706/- includes delay payment charges charged by broker of Rs.112311/-

Please accept the above submission and oblige. Thanking you, Yours faithfully, Sd/- CA. M.S. Bhakkad”

21. Referring to the decision of the Hon’ble Allahabad High Court in the case of PCIT vs. Smt. Renu Agarwal (2023) 153 taxmann.com 578 (Allahabad), he submitted that the Hon’ble High Court in the said decision has held that where AO disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by AO had rightly been deleted.

Counsel for the assessee drew the attention of the Bench to the following written submissions: “3. Submissions a) Name confusion: Vide Para 5.3, learned CIT(A) has observed discrepancy in name of the alleged penny stock company. As per details on record, the company, of which, shares were transacted by assessee was having name as M/s S V Electricals Limited. Kindly note the relevant dates matrix summarized in the above Events Chart (first 4-5 entries therein). Now, as per facts revealing from Events Chart, Assessee has acquired shares of M/s S V Electricals Limited in Dec 2009 and sold the same in January 2011. Thus, assessee was not holding any shares of the said M/s SV Electricals Limited after January 2011. Now, the name of the said company was changed on 14/3/2012. Thereafter, an internal report appears to have been made by Mumbai office of I-T (INV). From perusal of Para-2 of the "reasons", it appears to have been stated that, assessee has sold shares of M/s Nivyah Infrastructure & Telecom Private Limited for amount of Rs.1,60,30,716. Nowhere, in the "reasons", name of M/s SV Electricals Limited is stated. As such, the actual transaction of exempt LTCG declared by the Appellant was glossed over while recording "reasons" by the learned AO. Thus, there was no any independent application of mind of learned AO, while recording of the "reasons". Learned CIT(A) has followed decision of Honorable Bombay High Court in case of South Yaara Holdings vs. ITO - 104 Taxmann.com 216 at Para 5.3, wherein, identical facts existed and wherein, Honorable Bombay high Court has observed that "reasons" were recorded without due application of mind. b) Amount difference: From perusal of 2nd para on page-1 and last para on Page-2 of the "reasons" reveal an alleged LTCG amount of Rs.1,60,30,716 which has escaped assessment. As against, the 2nd last para of the 1st page of the two pages "reasons" of reassessment, relates to the exempt LTCG of Rs.1,44,35,387 declared by the Assessee. Now, the difference of the two amounts i.e. Rs.1,60,30,716 and Rs.1,44,35,387 is the cost of acquisition of Rs.25 lacs of the 2,50,000 shares of M/s S V Electricals Limited. The "reasons" keep on repeating the amount of Rs.1,60,30,716 as alleged escaped income. It appears, the learned AO, while recording of "reasons" was alleging that, the LTCG of M/s Nivyah Infrastructure & Telecom Services Limited was a totally different LTCG as against the LTCG of M/s S V Electricals Limited. In reality, it was only a case of change of name. Even this amount difference reveals lack of application of mind of learned AO. c) Detailed enquiry during search & 153A assessment: Assessee has filed details of the search proceedings which took place in case of the Mantri Group on 2/5/2013. During the search proceedings, statement of Mr. Atul Mantri was recorded a copy of which is placed in Paper-Book at Page-9 onwards. Vide Question Nos.19 to 21, details of exempt LTCG were enquired by the search party in detail. These details were as follows – (i) Details of bank pass-books showing purchase & sale (ii) Details of broker notes (iii) Details of DEMAT account (iv) Quantification of exempt LTCG (v) Reflection in Balance-sheet Further, vide submissions during search based assessment proceedings, following further details were provided - (vi) Fluctuation in share price of M/s SV Electricals Ltd (vii) audited Balance-sheets of M/s SV Electricals Limited A copy of the said submission is placed on record at Page-24 onwards. From perusal of Point No.4, it appears, all aspects involved in scrutiny of any exempt LTCG were duly provided. Thereafter, learned AO, in the search based assessment has accepted the exempt LTCG. Now, vide "reasons" recorded in March 2018, the very same LTCG was proposed to be taxed. This is a clear reapplication of mind, and the same is contrary to the settled principles arising from landmark decision in case of CIT V. Kelvinator of India Ltd - 320 ITR 561 (SC). A copy of the said decision was submitted during the course of hearing. Learned CIT(A), at Para 5.4 of his appellate order has referred to a decision of Honorable Bombay High Court in case of Chanchal Bhagwatilal Gokhru v. UoI - 152 taxmann.com 214, wherein, identical facts were present. It was held therein that, reapplication of mind is not permitted in a reassessment u/s 147. d) Absence of any new 'tangible material’ revealing from "reasons": Perusal of the "reasons" for reassessment reveals that, the very same data of price fluctuation of M/s Nivyah Infrastructure & Telecom Services Ltd along with the audited accounts, etc. was relied upon for recording "reasons" of reassessment. Now, the very same data was already existing on files of the learned AO in the search based assessment, which was duly mind applied. In other words, there was absence of any fresh tangible material for the presently considered "reasons" of reassessment. Hence, the "reasons" of reassessment are incorrectly recorded. e) Statements of three brokers: During the course of 147 proceedings, learned AO has extended copies of the statements of three brokers, named as follows- (i) Mr. Navneetkumar Singhania of Kolkata (ii) Mr. Beni Prasad Lahoti of Kolkata (iii) Mr. Shiv Sundar Banka of Kolkata Copies of these statements are submitted at Page-64 onwards in Paper- Book. Perusal of these statements reveal that, nowhere, assessee has been named by these three brokers as any beneficiary of the alleged bogus LTCG. Yet, the I-T department has relied upon these statements for taxing the exempt LTCG as bogus LTCG. Assessee has even requested for CROSS examination of the three brokers, which could not be extended by I-T department. It transpires, reliance of the statements of the three brokers for making additions on account of alleged bogus LTCG was inchoate/premature and as such, incorrect. f) Reliance on decision of Honorable Supreme Court in case of PCIT v. Renu Agarwal - 153 taxmann.com 579: Copy of the said decision is placed at Page-172 of the Paper-book. Perusal of the apex court decision, along with Honorable Allahabad High Court decision (and along with related decision in case of PCIT v Krishna Devi- 126 taxmann.com 80-Delhi) reveals that, taxation of LTCG on test of human probability (based on price fluctuation despite low assets base etc.) is a good reason to suspect, but not a sufficient reason to believe escapement of income. It transpires that, unless some tangible material in the form of brokers statements (alleging assessee for accommodation entries), or some evidence showing unaccounted money of assessee, etc. is found, suspicion based assessments are incorrect. Assessee relies on these evolved principles of adjudication of exempt LTCG. g) Taxing of alleged unaccounted income: Finally, assessee submits that, in his case, search based assessment has already been concluded in year 2016 owing to a search in May 2013. Despite, the learned AO has recorded "reasons” for taxing alleged unaccounted income on mere suspicions. Now, a search-based assessment stands at an elevated position as regards taxation of unaccounted income, when pitted against any 147 assessment, and that too, on mere suspicions. It appears, learned AO's action of recording "reasons" of reassessment were totally incorrect.

4. Prayer Assessee submits that appeals preferred by I-T department are incorrect and as such deserve to be dismissed.”

OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, AAYAKAR BHAVAN, NEAR HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD (Ph. 0240-2373001) No.ABD/ACIT/CC-1/147-Reasons/2018-19/63 Date: 10.05.2018

To Ashish Omprakash Mantri, Abhay Oil Industries, New Mandha Jalna 431 203 Email:sgbhakkad@gmail.com Mo. No. 9422219414 Ph. No.248 2230539 Sir, Sub: Reasons for proceedings u/s 147 of the Income-tax Act, 1961-reg Ref: Your request letter dated 21.04.2016 received in this office on 23.04.2018 Please refer to the above mentioned subject and reference. As per your request, the reasons recorded for initiating proceedings u/s 147 in your case for AY 2011-12 is as under: "The assessee is an individual having income from salary, house property, business and profession and other sources. A search action u/s 132 was conducted in the card of the assessee on 02.05.2013 and accordingly a notice u/s 153A was issued to the assessee in response to which the assessee filed his return of income on 28.02.2014 declaring total income of Rs.15,00,324/-. Thereafter, assessment under section u/s 143(3) r.w.s 153A wat completed on 22.03.2016 assessing total income at Rs.16,79,227/-. The office has received information from the office of the DDIT (Inv), Unit 8(3), Mumbai on 23.03.2018. As per the information received, the assessee has sold his investment in penny stock of M/s Nivyah Infrastructure & Telecom Services Ltd amounting to Rs.1,60,30,716.35/- during the AY under consideration. Further, it is stated that the company M/s Nivyah Infrastructure & Telecom Services Ltd. is a penny stock company and has facilitated various beneficiaries to claim LTCG exempt from tax under section 10(38) of the Act. The assessee is one of the beneficiaries of this penny stock company listed on BSE Script Code 517534. Also, it is stated that this company has been used to facilitate introduction of unaccounted income of members or beneficiaries in the farm of exempt capital gain or short Term Capital Loss in their books of accounts. The assessee Shri Ashish Omprakash Mantri is one such beneficiary and the amount involved in his case is Rs.1,60,30,716.35/-.

As per information received, the share price of /s. Nivya Infrastructure & Telecom Services Ltd rose from Rs.39/- on 21/07/2009 to Rs.2,050/-on 05/01/2011 and dipped to Rs.47.20 on 10.07.2012. However, financials of the company for the relevant period do not show any substantial change so as to support such a huge share price movement. The company does not have business to justify the sharp rise in market prices of the shares. The sharp rise in the market price of this entity is not supported by financial fundaments of the company. Both purchase and sale of share are concentrated within few persons / entities. The exit providers do not have credit worthiness. They are either non-filers or have filed nominal return of income and have not paid tax. On verification of the records of the assessee available with this office, it is noticed that the assessee has claimed exemption u/s 10(38) of Rs.1,44,35,387/-. However, no details regarding this LTCG has been mentioned such as the name of the company of which the stocks have been traded, purchase cost of shares and sale consideration etc. As the information received has established that the assessee has entered into transaction of purchase and sale of stock of M/s Nivya Infrastructure & Telecom Services Ltd which is a penny stock company, the case of the assessee needs to be assessed afresh so as to unearth the mechanism of converting unaccounted money into accounted for via investment in penny stock company. On in depth verification, it is clear that the assessee has employed the services of penny stock company i.e. M/s Nivya Infrastructure & Telecom Services Ltd. to convert his own unaccounted money into accounted one, in the form of exempt LTCG in lieu of commission with a view to evade paying taxes thereon. As discussed above, the assessee Shri Ashish Omprakash Mantri las derived income from LTCG purchase and sale of penny stuck of M/s Nivya Infrastructure & Telecom Services Ltd which is as penny stock company and exemption an LTCG has been claimed u/s 10(38) of the Act thereby doing away with the requirement of paying taxes on this Income. This LTCG is not real and the whole mechanism of earning exempt LTCG has been created with a view to convert his own unaccounted money into accounted income. Hence, I have reasons to believe that the LTCG earned via this mechanism to the extent of Rs.1,60,30,716.35/- has escaped assessment due to failure on the part of the assessse to truly and fully disclose the material facts necessary for his assessment. As per information received in this office the assessee has earned LTCG via penny stock and has claimed exemption u/s 10(38) of the Act. This being the mechanism of converting unaccounted money into accounted, or needs to be examined thoroughly as the said money was the unaccounted money of the assessee himself and the same was not disclosed by the assessee neither in his ITR nor during the course of assessment proceedings u/s 143(3) r.w.s 153A. Hence, the assesses hos failed to disclose truly and fully all material facts necessary for his attessment for AY 2011-12. Hence, the present case is covered by proviso to section 147. Also, even if the books of accounts were produced during the assessment proceedings the information related to the issue under consideration was embedded in such a manner that the some could not have been discovered except with a diligence. Hence, explanation 1 to section 147 is also applicable to this case. In this case the return of income was filed for the year under consideration and assessment u/s 143(3) r.w.s 153A of the Art was made on 22.03.2016. Since 04 years from the end of the AY has expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that the income for the year consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY under consideration. It is pertinent to mention here that the reasons to believe that income has escaped assessment for the AY under consideration have been recorded above. I have carefully considered the assessment records containing the submissions made by the assesse in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration.

4. Thereafter on 29.3.2018, the Assessing Officer issued the impugned notice seeking to re-open assessment for A.Y.2011-12. The reasons in support of the impugned notice as communicated to the petitioner reads thus:- "Reasons for reopening u/s 148 for A.Y.2011-12 is provided as under : 1. The information has been received from DDIT (Inv) Unit 8 (3) Scindia House, Mumbai-38 vide their letter dated 23-3-2018 which is received in this office on 28-03-2018. 2) The DDIT (Inv) Mumbai has received information that M/s Nivyah Infrastructure & Telecom Services Ltd is a penny stock listed do in BSE with scrip code (517634) and this company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or short term capital loss in their books of accounts. It was noticed that share price of M/s Nivyah Infrastructure & Telecom Services Ltd rose from Rs.39 in 21st July 2009 to Rs.2050 on January 2011 and dipped to Rs.47.20 on 18th July 2012. However, the financials of the company for the relevant period do not show any substantial change so as to support such huge share price movement. The company does not have business worthwhile to justify the sharp rise in market price of shares. The sharp rise in market price of this entity is not supported by the fundamentals of the company. Both purchase and sale of the shares are concentrated within few person/entities. 2.2. The DDIT (Inv) has traded in the above script namely M/s Nivyah Infrastructure & Telecom Services Ltd during the F.Y. 2010-11 to the tune of Rs.35040000000000000000. 2.3. The DDIT (Inv) Unit - 8 (3) Mumbai has given a finding that enquiries have been conducted in the penny scrip namely M/s Nivyah Infrastructure & Telecom Services Ltd vis-a-vis facilitating introduction of unaccounted income of members of beneficiaries in the form of exempt Capital gain or Short term Capital Loss in their books of account. These transactions are mostly in view of cash of equal amount and commission is charged over and above at certain fixed percentage for providing such accommodation entry. These accommodation entries were taken from various beneficiaries for introducing their unaccounted cash into their books of accounts without paying the due taxes. 2.4 The detailed investigation report containing the modus operandi of tax evasion through penny stock and discussion in entry operators from brokers and scripts has been provided along with the letter of DDIT (Inv) Mumbai. 2.5. Our assessee is one of the beneficiary who have availed accommodation entries by way of traded in shares to the tune of Rs.3504000,000000000005 in M/s Nivyah Infrastructure & Telecom Services Ltd with a view to ultimately reduce tax liability and or to bring capital in the form of equity or debt or tax exempt income or a combination of the above transaction, therefore, it is necessary to verify the actual amount of bogus LTCG analyzing the D-mat statement and bank account statement.

3. In this case return of income as fixed for the year under consideration and regular assessment u/s 143 (3) was made on 27.11.2013. Since 4 years from the end of the relevant year has expired in this case the requirements to initiate proceedings u/s 147 of the IT Act are reasons to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded in paragraph 2 above.

4. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue the notice u/s 148 has been obtained separately from the Pr.Commissioner of Income Tax as per the provisions of section 151 of the Act.

5. Notice u/s 148 was issued with prior approval of Pr.Commissioner of Income Tax-6 Mumbai."

5. On receipt of above reasons on 9.8.2018, the petitioner filed its objections to the reasons in support of the impugned notice and in particular pointed out that the assessee had dealt with a company called "S.V.Electricals Ltd" and not with M/s Nivyah Infrastructure & Telecom Services Ltd. The name of company "S.V.Electricals Ltd" had subsequently changed on 14.2.2012 to M/s Nivyah Infrastructure and Telecom Ltd. It had also pointed out in its objection that during the regular assessment proceedings, details of the petitioner's dealing in scrip namely "S.V.Electricals Ltd" had been submitted during the regular assessment proceedings. The objections primarily proceeds on the basis, that the reasons as recorded, display total non-application of mind while forming reason to believe, this as during the relevant time, there was no company by the name "M/s Nivyah Infrastructure and Telecom Services Ltd" in which the petitioner could have dealt. The petitioner's objections were rejected by the Assessing Officer by passing an order on 28.9.2018. The order on objections, does not deal with the petitioner's primary contentions that the petitioner had not dealt with any company by name "M/s Nivyah Infrastructure and Telecom Services Ltd" during the period relevant to the subject assessment. This order dated 28.9.2018 disposing of the objections is completely silent on the above objections while rejecting the petitioner's objections.

6. The respondent's Assessing Officer has filed an affidavit-in reply dated 5.2.2019 of the Assessing Officer. However, the reply does not deal with this objection taken in the petition. Nevertheless, Mr.Suresh Kumar the learned counsel for the revenue submits that all these issues will be subject of consideration during the re- assessment proceedings. Thus, this Court should not interfere at this stage.

8. From the reasons, it is evident that the impugned notice has been issued on the basis of information received from the Deputy Collector, Income Tax (Investigation) alleging that M/s Nivyah Infrastructure & Telecom Services Ltd is a penny stock listed on the Bombay Stock Exchange and that the petitioner had dealt with the same leading to escapement of income. On receipt of information, the least that is expected of the Assessing Officer is to examine the same in the context of the facts of this case and satisfy himself whether the information received does prima facie lead to a reasonable belief that income chargeable to tax has escaped assessment. In this case, the reasons indicate that the Assessing Officer has not carried out such exercise and accepted the report of the Deputy Collector of Income Tax (Investigation) Mumbai to conclude that the petitioner had dealt with Nivyah Infrastructure and Telecom Services Ltd during the previous year relevant to the assessment year 2011-12. Admittedly, there was no company by name "M/s Nivyah Infrastructure & Telecom Services Ltd" in existence during that year for consideration. This clearly shows that the Assessing Officer acted on the satisfaction of the Deputy Collector of Income Tax (Investigation) that income chargeable to tax has escaped assessment. It must also be borne in mind that the impugned notice is issued beyond the period of four years from the end of the relevant assessment year in a case, where the assessment was completed under section 143 (3) of the Act. Therefore, the Assessing Officer would have to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the Assessing Officer would have come to the conclusion that there was no failure to disclose truly and fully all material facts necessary for assessment. Thus, hit by the proviso to section 147 of the Act. However, the Assessing Officer has not applied his mind to the information received in the context of the facts on record. The impugned notice is bad-in-law, as it has not been issued by the Assessing Officer on his satisfaction that there is reason to believe, that income chargeable to tax has escaped assessment.

7. We find nothing to indicate failure to disclose any material fact. Upon examining the order u/s 143(3) we find that the AO has considered these very transactions and added Rs.1,07,18,922 to the total income on which the Petitioner has already paid the tax. We find no substance in the AO's reason to believe that income chargeable to tax has escaped assessment in as much as there is no mention of any tangible material that led to his conclusion. The entire process is triggered on a change of opinion as to the calculation of tax payable by the assessee. As stated hereinabove, it is evident that bald assertions of the transaction being "an accommodation entry made in collusion & connivance with the entry provider" are used to re-open the assessment. It is well settled judicial principal that, the true test of income chargeable to tax escaping assessment is whether there exists fresh "tangible material" on the basis of which appropriate conclusion is reached. In the absence of such material the reassessment proceedings would be invalid. This principle has been upheld by the Apex Court as well as the jurisdictional High Courts in various rulings. Furthermore, this Court has held that reconsideration of the material available at the time of original assessment proceedings tantamount to change of opinion and therefore invalid.

6. The concurrent findings of fact has been recorded by the first appellate authority and the ITAT. Thus, no substantial question of law is involved in the present appeal. The matter is concluded by findings of fact.

7. For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed.”

Order pronounced in the open Court on 17th July, 2025.