INCOME TAX OFFICER WARD 4(2)(1), AHMEDABAD, AHMEDABAD vs. ALPESH MANHARLAL MISTRY , AHHMEDABAD

The registry has noted that there is a delay of 11 days in filing the above appeal. It is explained that the assessing officer by way of a Notarized Affidavit explained the delay due to administrative reasons and obtaining necessary approvals has caused the delay of 11 days in filing the above appeal. We are satisfied with the above reasons explained and thereby the delay of 11 days in filing the appeal is hereby condoned.

Brief facts of the case is that the assessee is an individual who is in the business of job work of wooden furniture. The total income of the assessee is below basic exemption and is not required to file Return of Income. The assessee opened a demat account with the intent to earn short term gain. The assessee undertook trading in equity and F&O through the demat wherein he has invested in the stocks of VMS Industries along with other stocks i.e. assessee purchased 4000 shares of VMS Industries for Rs.149964.65 and sold them at 148327.50 resulting in a loss of Rs. 1637.15. Likewise in all other transaction, there is some loss resulting in total loss from share transaction Rs.41,438.95 and loss from F&O amounts to Rs. 36,969/-. The assessee thus not carry forward and set off the losses incurred in the above transaction by filing the Return of Income.

Taking note of the purchase of shares of VMS Industries which is said to be a penny stock, the assessment was reopened by the A.O. by issuing notice u/s. 148 of the Act on 29-03-2019 based on the information received from the Investigation Wing. However assessee has not filed any return of income, therefore notice u/s 142(1) was Page No 3 ITO Vs. Alpesh Manharlal MIstry issued on 07-09-2019. The assessee failed to reply to this notice also, which resulted in passing exparte assessment order, thereby the investment in stocks pertain to VMS Industries Ltd. amounting to Rs.1,48,488/- is taxed u/s 69 of the Act as unexplained and demanded tax thereon.

Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A). During the appellate proceedings, the assessee submitted that copy of the summary and share transaction and F&O summary with supporting evidences. Thus the submissions made by the assessee being fresh evidences, Ld. CIT(A) called for Remand Report from the assessing officer under Rule 46A of the I.T. Rules. The Assessing Officer objected to the admission of additional evidences since the same are not covered under the four boundaries as envisaged in Rule 46A. However the Ld. A.O. has not offered any comments on merits of the case by stating that sufficient opportunities were given to the assessee during the reassessment proceedings. The Ld. CIT(A) after considering the rejoinder from the assessee deleted the addition and allowed the appeal in favour of the assessee by observing as follows: “6. Decision; The Bombay High Court in the case of Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 held that, there is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. Therefore we find nothing perverse in the order of the Tribunal. In of Rajnikant Prabhudas Page No 4 ITO Vs. Alpesh Manharlal MIstry Mandavia (I.T.A. Nos. 401&402/Ahd/2019) dated 25.09.2023 ITAT Ahmedabad dismissed revenue's appeal by stating that no material has been brought on record to suggest that assessee was involved in any price rigging and nor has the case of assessee mentioned in the list of beneficiaries, by the persons whose statements were recorded. In the statements recorded, the name of the assessee as a beneficiary was not specifically mentioned as noted by Supreme Court in the case of Renu Aggarwal (153 taxmann.com 579). In the instant case the appellant has submitted evidences showing normal share trading through a broker and incurring minor losses in the alleged penny stock trading. There is nothing to show that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. There is nothing in the documents or any statement to show that the appellant in this case was involved in price rigging other that he purchased and sold the share in the normal course of trading. As per above decisions transaction of purchase and sale of shares supported by demat statements cannot be treated as bogus. As a result, the appeal is allowed.”

Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: (a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,48,488/ made by AO on account of unexplained investment in Penny Scrip M/s. VMS Industries Limited u/s. 69 of the IT Act, despite the fact that: (1) The credible information was received from Investigation wing that the assessee has traded in Penny Scrip M/s VMS Industries Limited and received accommodation entries. (ii) During the assessment proceedings, the assessee had failed to furnish any supporting documents to establish its claim and ex-parte order u/s. 144 r.w.s. 147 of IT Act was passed by assessing officer. (iii) During the remand proceedings, the AO had filed objection against admission of additional evidences filed by assessee before Appellate authority, as the case is not covered under Rule 46A of IT Rules 1962. (b) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.

In the result, the appeal field by the Revenue is hereby dismissed.