URVASHI GIRISHBHAI LAL,RAJKOT vs. ITO WD 1(2)(1), RAJKOT, RAJKOT

Brief facts, as discernible from the orders of lower authorities are that during the course of investigation, information was received from DDIT(Inv), Unit-1(3), Ahmedabad, with regard to bogus long term capital gain and it was found that the assessee has made bogus LTCG through the scrip named, M/s Dhvanil Chemicals Ltd. As per the information, the assessee had purchased 10800 shares and paid value of Rs.7,01,955/-. The assessee had sold 10,800 shares and received sell consideration value of Rs. 8,14,100/-, during the F.Y. 2012-13 and routed his unaccounted income and booked bogus long-term capital gain (LTCG). It was found that the assessee has made transaction of sale in scrip of M/s. Dhvanil Chemicals Ltd., which is a penny stock. The assessee is one of the beneficiaries of the penny stock transaction for F.Y. 2012-13. The detail of trading value of the transaction in the scrip during FY 2012-13 in case of the assessee is as under:

The assessing officer, after analyses of reply of the assessee found that alleged purchased and sale of the shares in the scrip of M/s Veronica Production Ltd. /Dhvanil Chemicals Ltd /Shrey Chemicals Ltd in the F.Y. 2012-13 trade value of shares sharp raised was pre-arrange and nothing only accommodation entries. Hence, the consideration received from sale of shares of M/s Veronica Production Ltd. /Dhvanil Chemicals Ltd / Shrey Chemicals Ltd of Rs. 8,14,100 /- was added back to the total income of the assessee u/s.68 of the Income tax Act.

Aggrieved by the order of the Assessing Officer, the assessee carried the mater in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer. Therefore, assessee is in further appeal before this Tribunal.

I have given my thoughtful consideration to rival contention. I have perused case file as well as paper books furnished by assessee. The Ld. Counsel for the assessee submitted that based on the same scrip, which is involved in the assessee’s case under consideration, the Assessing Officer dropped the assessment proceedings / reopening proceedings under Section 147 of the Act, that is, reassessment was dropped by the assessing officer. In this regard, the detailed submission made by the assessee and the arguments made before the Ld. CIT(A), are reproduced below: “Simply relying upon the general modus operandi does not mean that all the transactions undertaken throughout the country by millions of subscribers are bogus. 42. In this regards, we would like to further state that on identical facts and reasons wherein department has reopened assessments in many cases, the reopening is either Page 3 of 7 dropped or assessment order has been passed without making any addition, the details of the identical cases are as under: - - Imran Amroniya A.Y. 2012-13 - Imran Amroniya A.Y. 2013-14 - Jayraj Gadesha A.Y. 2013-14 - Jayraj Gadesha A.Y. 2014-15 - Bhavesh Panchasara A. Y. 2013-14 - Tosif Amroniya A.Y. 2013-14 - Raju Lunagariya A. Y. 2013-14 - Sunil bhatt Α.Υ. 2012-13 The copy of assessment orders for all the above mentioned assessee is enclosed at page no. 52-68.”

It is therefore stated that reopening of the assessment u/s 147 of the Act based on the said ground is bad-in-law.”

Therefore, Ld. Counsel for the assessee submitted that the reassessment proceedings, on the identical facts, considering the same scrip, was dropped by the Assessing Officer. Therefore, re- assessment proceedings initiated against the assessee may be quashed.

The Ld. Counsel further submitted that reasons were recorded by the Assessing Officer on the belief that assessee has earned Long Term Capital Gain. However, actual fact is that assessee has earned Short Term Capital Gain.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

I have considered the submissions of both the parties. I note that the assessment is reopened based on incorrect facts.The re-opening is based on the basis of the information received from DDIT (Inv.), Ahmedabad. As per the reasons recorded for re-opening, the main reason is stated as under:

I note that the Assessing Officer has reopened the assessment of the assessee based on the fact that assessee has earned the long-term capital gain (LTCG) and therefore, income of the assessee has escaped assessment. However, the real fact is that the assessee did not earn the LTCG in the scrip mentioned in the assessment order and the assessee earned only short-term capital gain (STCG) which was disclosed by the assessee in the return of income and paid the taxes thereon. Therefore, the item on which the assessee has paid the taxes and it is already stated and mentioned in the Return of Income and books of accounts of the assesse, it cannot be said that the income has escaped assessment. Therefore, the income of short-term capital gain, is already mentioned in the books of accounts of the assessee and assessee has offered the same in the income tax return and paid the due taxes, therefore, on such item, there should not be any reassessment proceedings, as the income has not escaped from the assessment. Therefore, assessment in the assessee’s case was reopened based on the incorrect facts and incorrect presumption. Moreover, the Assessing Officer did not provide Page 6 of 7 the information of reopening to the assessee. Apart from these reasons were recorded by the Assessing Officer on borrowed satisfaction without application of mind. Hence, I quash the reassessment proceedings and allow the appeal of the assessee.As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, appeal filed by the assessee, is allowed.