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Facts
The assessee is appealing an order from the CIT(A) which upheld the validity of reassessment proceedings initiated by the AO under section 147 of the Income Tax Act and confirmed additions made under sections 68 and 69C. The additions pertained to alleged bogus capital gains from the sale of shares of Comfort Intech Ltd., treated as unexplained cash credit, and an alleged commission payment.
Held
The Tribunal held that the reassessment proceedings were validly initiated as the information received from the Investigation Wing constituted tangible material for the AO to form a belief of escaped income, especially since the assessee had not filed an original return. Regarding the additions, the Tribunal found that the assessee failed to discharge the onus of proving the genuineness of the share transactions, particularly the steep price rise in a short period, and the commission addition was also upheld. Therefore, the appeal was dismissed.
Key Issues
1. Whether the reassessment proceedings initiated under section 147 were valid. 2. Whether the additions made under sections 68 and 69C for alleged bogus capital gains and commission payment were justified.
Sections Cited
147, 68, 69C, 148, 143(1), 143(3), 139(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC’’ JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 286/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 11-01-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2011-12 raising following ground of appeal. ‘’1. The ld. CIT(A) has erred on facts and in law in upholding the validity of order passed by AO u/s 147 of I.T. Act.
1. 2. The ld. CIT(A) has erred on facts and in law in confirming the addition made by AO u/s 68 of the Act by SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR holding that gain of Rs.10,05,000/- on sale of shares of Comfort Intech Ltd. is bogus by making various incorrect and irrelevant observations and ignoring the fact that the assessee has incurred loss in the share trading. He has further erred in not allowing set off of the gain against the loss incurred in other shares.
3. The ld. CIT(A) has erred on facts and in law in confirming addition made by AO u/s 69C of the Act by holding that the assessee has paid Rs.84,300/- being 6% of the sale proceeds of the shares as commission.
2.1 The Ground No. 1 of the assessee relates to challenging the validity of the order passed by the AO u/s 147 of the Act. In this regard, the ld. AR of the assessee relied upon the written submission to support this ground and the same is reproduced hereunder:- ‘’1. At the outset it is submitted that there is contradiction in the reasons recorded at Page 1-3 of the assessment order and the reasons provided to the assessee in course of the assessment proceedings. In the assessment order AO has stated that information is received from DDIT Investigation, Kolkata whereas in the reasons provided to the assessee it is stated that an enquiry report along with annexures has been received from DCIT, Central Circle-3(4) Mumbai where it is informed that M/s Comfort Intech Ltd. is a penny stock company listed on BSE and trading in this script is highly suspicious and assessee is one of the beneficiaries who has traded in this script. Thus, it is clear that AO has not even applied his mind as to whether the information is received from DDIT Investigation, Kolkata or from DCIT, Central Circle-3(4) Mumbai. Hence, the order passed u/s 147 is illegal and bad in law at the very threshold.
2. From the plain reading of the reasons recorded it can be noted that notice u/s 148 is issued solely on the basis of enquiry report received from DCIT, Central Circle-3(4) Mumbai. The AO has not made any enquiry of his own to come to a belief that income has escaped assessment. The AO in the reasons recorded at Para11(4) (PB 10) has himself admitted that no enquiry is necessary before recording satisfaction for issuance of notice since the information is specific. Thus the reasons recorded for re-opening is on borrowed satisfaction and not on any satisfaction by the AO. The SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR primarily condition for initiating action u/s 147 is that the AO must have reason to believe that any income chargeable to tax has escaped assessment. From recording of reasons it is evident that only basis for reopening the assessment is the information received from DCIT, Central Circle-3(4) Mumbai. This shows that AO has mechanically and blindly acted upon the enquiry report received from Central Circle, Mumbai without applying his own mind or without causing any enquiry at his end to arrive at believe that income of the assessee has escaped assessment. Hence, reopening of assessment is illegal and bad in law. For this purpose reliance is placed on the following cases:-
Smt. Anshita Vimal Jain Vs. ITO (2023) 199 ITD 168 (Surat) (Trib.) Where AO merely on basis of information received from Investigation wing, Mumbai with reference to search carried out in case of one ‘GJ’ reopened assessment on ground that assessee had taken accommodation entries of bogus purchase bills from ‘GJ’, since AO had not recorded his own satisfaction and had not made any effort to examine and to discuss material received from Investigation wing, reassessment so made was to be quashed. Pioneer Town Planners Pvt. Ltd. Vs. DCIT (2018) 170 DTR 237 (Del.) (Trib.) AO having formed the belief that assessee’s income has escaped assessment only on the basis of some material received from the Investigation Wing without making any effort to examine and discuss the material received from the Investigation Wing and without application of the mind to the same, it follows that he initiated the reassessment proceedings on the basis of borrowed satisfaction without application of his own mind and therefore, reassessment proceedings and all consequent proceedings and orders including impugned reassessment are bad in law and not sustainable. Deepraj Hospital Pvt. Ltd. Vs. ITO (2018) 65 ITR 663 (Agra) (Trib.) If the reopening is based on information received from the investigation dept., the reasons must show that the AO independently applied his mind to the information and formed his own opinion. The AO in the reasons has just stated the information received and his conclusion about the alleged escapement of income. As to what the AO did with the information made available to him is not discernible from the reasons. The reasons must also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO thereon as also the conclusions thereof. Further where the reasons make a reference to any document, such document and / or relevant portion thereof must be enclosed along with the reasons. Therefore, reasons recorded by the AO are found to be not in accordance with law. Consequently, the reassessment SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR proceedings, culminating in the order under appeal, are also not sustainable in the eye of law and they too are cancelled. Nothing further survives for adjudication. In the absence of the link between the information available with AO and formation of belief by AO for reassessment, reassessment proceedings are not valid. Smt. Sunita Jain Vs. ITO (2017) 49 CCH 0330 (Ahd.) (Trib.) The Hon’ble ITAT after relying on the decision of Gujarat High Court in case of Harikishan Sunderlal Virmani Vs. DCIT, quashed the assessment framed u/s 147. The Hon’ble High Court in its case held that the material on the basis of which the AO seeks to assume the jurisdiction under section 147 of the Act is the information received from the external source viz. the Principal Director of Income Tax (Investigation), Ahmadabad. It cannot be disputed that on the basis of the information received from another agency, there cannot be any reassessment proceedings. However, after considering the information/ material received from other source, AO is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. PCIT Vs. RMG Polyvinyl (I) Ltd. (2017) 249 Taxman 610 (Del.) (HC) Where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not be said to be tangible material per se and thus, reassessment on said basis was not justified. M/s Devansh Exports Vs. ACIT (2019) 176 DTR 17 (Kol.) (Trib.) The information given by DIT(Inv.) can only be a basis to ignite/ trigger "reason to suspect". The AO has to carry out further examination to convert the "reason to suspect" into "reason to believe". If the AO acts on borrowed satisfaction and without application of mind, the reopening is void. Balaji Health Care Pvt. Ltd. Vs. ITO (2019) 55 CCH 0168 (Jaipur) (Trib.) The AO cannot reopen without establishing prima facie that assessee's own money has been routed back in form of share capital. While he can rely on the report of the Investigation Wing, he has to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment. In absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside.
SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR 3. The Ld. CIT(A) has relied on certain decisions but these decisions are not applicable on the facts of the assessee. In the first decision of Gujarat High Court it was held that there are no fetters on the AO carrying out preliminary enquiries even before issuance of notice of re-opening in order to collect information on the basis of which he may form a belief that income chargeable to ta has escaped assessment. Thus in this case AO carried out preliminary enquiries which is not in the present case of the assessee. In the second & third decision of Gujarat High Court it is held that in Writ Jurisdiction it is not open for the court to go into factual aspects raised by the assessee and therefore these decisions are not applicable. In the fourth decision AO received information from Investigation Wing that two well-known entry operators of the country provided bogus entries to various beneficiaries but in the present case the reasons recorded do not specify name of any broker through whom alleged accommodation entry has been taken. The fifth decision of Delhi High Court is in a different context where it directed the ITAT to hear the revenue’s appeal on its merit and render the decision in accordance with law. The sixth decision of Delhi High Court is in context of re-opening within four years where assessment is made u/s 143(3) which is not in the present case. In view of above, order passed u/s 147 in consequence to the reasons recorded u/s 148 is illegal and bad in law and the same be quashed.’’ 2.2 On the other hand, the ld. DR supported the order passed by the Revenue Authorities and also the judgments. It was submitted by the ld. DR that the assessee was having tangible information received from DDIT (Investigation), Calcutta that M/s. Comfort Intech Ltd. is penny stock and the assessee being one of the beneficiaries who had taken accommodation entries of STCG in shares of this company whereby shares purchased for Rs.4.00 lacs was sold for Rs.14.05 lacs in a short span of time. Since the assessee company being one of the beneficiaries, therefore, on the basis of tangible materials the proceedings for reopening were initiated and concluded after adopting due procedure. The ld. DR thus requested to dismiss the Ground No. 1 raised by the assessee.
SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR 2.3 The Bench has heard both the parties and perused the materials available on record including the judgements cited by the respective parties. Before I come to the merit of the present case, it is necessary for the Bench to evaluate the orders passed by the Revenue Authorities while adjudicating this ground. Although, the ld CIT(A) has deal with this ground in Para No. 5 to para 5.6 yet the operative portion is contained in para 5.3 to 5.6 of his order and the same is reproduced as under:- ‘’5.3 The reassessment order and the contentions of the appellant have been considered carefully. It has been observed that the appellant did not raise any objection to the assumption of jurisdiction u/s 147 by the AO during the course of reassessment proceedings. AO has applied his mind independently after verification of the records of the appellant in the database that the appellant did not file original return of income and that no original scrutiny proceedings was carried out as well as there is cogent material in the form of information received from the Investigation Wing to form the belief that income has escaped assessment as the appellant had failed to furnish true and material facts fully in the Return of Income. The reliance placed by the appellant has carefully gone through. However, the same is not squarely applicable to the facts of the case. In the case relied upon by the appellant. the appellant has filed return of income as well as original assessment proceedings were carried out and thereafter, on the basis of the audit objection, the case was reopened while in the present case, the facts are different as in the instant case, no original return of income and assessment proceedings were carried out and thereafter, the AO had information received from within the Department which was based on various inquiries and investigation and on the basis of this, the case of the appellant has been reopened. In this regard, reliance is placed on the following judgement in which the reopening SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR based on information received from within the Department is held as valid:- i)Decision of the Hon'ble Gujarat High Court in the case of Aishwarya Dyeing Mills Pvt. Limited V/s DCIT 94 taxmann.com 430 wherein it is held as under: "Section 68, read with section 147 of the Income-tax Act, 1961- Cash credit (Share capital)-Assessment year 2010-11-For relevant year, assessee filed its return declaring certain taxable income Assessing Officer completed assessment under section 143(3) Subsequently, Assessing Officer reopened assessment proceedings on basis of information received from Investigation wing of Department that assessee-company had accepted share capital/share premium from various entries/parties which had been proved to be shell companies based on investigation conducted by Department- Assessee filed instant petition challenging validity of reassessment proceedings taking a plea that instead of information supplied to Assessing Officer by Investigation Wing of Department, he sought such information to reopen assessment which was not permissible - Whether there are no fetters on Assessing Officer carrying out preliminary inquires even before issuance of notice of reopening in order to collect information on basis of which he may either form a belief that income chargeable to tax had escaped assessment or abandon any further inquiry, upon being satisfied that no such belief could be formed-Held, yes- Whether, therefore, objection raised by assessee was to be rejected Held yes Whether further, in view of fact that Assessing Officer had specific and definite information at his command to form a belief that income chargeable to tax had escaped assessment validity of impugned reassessment proceedings was to be upheld Hold, yes (Paras 16 and 22) favour of revenue ii) Decision of the Hon'ble Gujarat High Court in the case of MSK Real Estate Pvt. Limited 95 taxmann.com 241 which has also held as under: "Section 68, read with section 147 of the Income-tax Act, 1961- Cash credits (Share capdal) Assessment year 2010-11 For SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR relevant year a company did not file its return - Subsequently, a search was carried out in case of M group of companies-in course of search certain documents wers seized showing that assesse had received share application money and share premium from various companies Investigation Wing of department provided information that those companies were paper/shell companies involved in providing accommodation entries in form of share capital store premium unsecured loans etc -On basis of aforesaid information, Assessing Officer initiated reassessment proceedings in case of assessee -Assessee raised objection to reassessment proceedings on ground that entre share application and share premium money was received by assessee on or before 31-3-2009 and thus, no taxing event took place during assessment year in question-Assessing Officer rejected assessee's objection on heo grounds, firstly, transaction would be completed only upon allotment of shares and secondly, a part of amount was received in relevant assessment year- Assessee fled instant petition challenging validity of reassessment proceedings-Whether in writ jurisdiction, it was not open for court to go into factual aspects raised by assessee and thus, validity of reassessment proceedings was to be upheld-Held, yes (Para 9] [in favour of revenue]’’ iii) Further, the Hon'ble Gujarat High Court in the case of Kottenz India Manufacturing Pvt. Limited Vs DCIT 95 taxmann.com 291 has held as under:- Section 68. mad with section 147 of the income-tax Act, 1961- Cash credits (Share capital)-Assessment year: 2010-11-For relevant year, assessee filed its return declaring certain taxable income – Return was processed under section 143(1)- Subsequently Assessing Officer received information from Investigation Wing that a company was involved in providing accommodation entries to various companies in form of share capital and share premium and assessee was one of such beneficiaries -On basis of said information Assessing Officer initiated reassessment proceedings Assessee raised an objection that it had not received any amount as share capital or share SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR premium from said company - Assessing Officer, however, rejected assessee's objection -Whether on facts, it was not open for Court in writ proceedings to undertake any factual inquiry in respect of objection raised by assessee -Held, yes Whether, therefore, validity of reassessment proceedings deserved to be upheld-Held, yes [Para 8] [In favour of revenue) iv) Furthermore, Hon'ble Gujarat High Court in the case of Peass Industrial Engineers Pvt. Limited V/s DCIT 73 taxmann.com 185 has also held as under: Section 68 read with section 147, of the Income-tax Act, 1961- Cash credit (Bogus entres) - Assessment year 2011-12 Whether what is required at stage of issuing notice under section 148 is a reason to believe and not establish fact of escapement of income and therefore, looking to the scope of section 147 as also sections 148 to 152 even if scrutiny assessment has been undertaken if substantial new material is found in form of information on basis of which assessing authority can form a belief that income of petitioner has escaped assessment it is always open for assessing authority to reopen assessment-Held, yes-Whether therefore where after scrutiny assessment Assessing Officer received information from investigation wing that two wes known entry operators of country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, Assessing Officer was justified in reopening assessment Held, yes [Para 12] [in favour of revenue In another case the Hon'ble High Court of Delhi in the case of Pr. CIT-7 vs. Paramount Communication P. Ltd. reported in (2017) 79 Taxmann.com 409 (Delhi) has held that the information received from Directorate of Revenue Intelligence (DRI) was tangible material to reopen the case as per the provision of section 147 of the Act. In that case the assessment was reopened on the basis of information received from DRI The assessments were quashed by the ITAT by holding that the reasons recorded were insufficient. The Hon'ble Court held the following SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR 8. As far as AY 2004-05 is concerned, this Court is of the opinion that in the reference to the bogus purchase made by the assessee from M/s Kashish Impex Pvt. Ltd and the information received for the period 17.09.2002 to 20.05.2005 and the amount of bogus purchase for the period under consideration amounted to Rs. 164 crores was entirely based upon the information received from the Directorate of Revenue Intelligence (DRI) Regional Unit at Jaipur. This in turn was based upon information given by the Central Excise Department. While it is true that the court is conscious that the reassessment notice should not have been routinely issued at the same time the nature of power is wide enough that when there an escapement of income and the Revenue has information ruling that this escapement is also relatable to suppression of material facts (which could include false claims), the power to reopen concluded assessment can validly be exercised. The consideration which ought to weigh with the Revenue and are considered valid are the existence of tangible maternal or information in the light of the judgment in CIT v. Kelvinator of India (2010) 320 ITR 561 (SC) 9. Having regard to the contents of the notice for AY 2003-04, the court a unable to agree with the findings of the ITAT it constitutes reference to tangible material "outside the record, i.e. information based upon the investigation of the Commissioner of Central Excise with respect to the purchases made by the assesses. However, as far as the second issue a concerned, the Court is of the opinion that even the rectified order does not address the issues squarely. Thus, argued such arguments could be validly raised. At the same time the court notices that for both AYs 2004-05 and 2005-06, the note discloses the source of the information, i.e. DRI Local Unit at Jaipur, sending information based upon the Commissioner of Central Excise's investigations. To require the Revenue to disclose further details regarding the nature of documents or contents thereof would be virtually rewriting the conditions in section 147 After all Section 147 merely authorizes the issuance of notice to reopen with conditions. If the Court were to dictate the manner and contents of what is to be written, the statutory SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR conditions would be added as it were in this context d needs to be emphasized that the court would interpret the statute as they stand in their own terms, but at the same time being conscious of the nights of the citizens So viewed, Kelvinator of India (supra) strikes just balance To add further conditions to the nature of discussion/ reasons that the officer authorizing the notice would have to discuss in the note or decision would be beyond the purview of the Courts and would not be justified. For the above reasons, this Court is of the opinion that the impugned order and the consequential order of 05.01.17 cannot be sustained They are accordingly set aside The question of law urged by the Revenue is answered in its favour The parties are directed to be present before the ITAT on 06.03.2017 The ITAT shalt proceed to hear the Revenue's appeals on its merits and render decision in accordance with law. All rights and contentions of the parties with respect to the merits are reserved’’ SLP against this order was dismissed by the Hon'ble Supreme Court on July 14, 2017 as reported in (2017) 84 Taxmann.com 300 (SC) 5.4 Further, it is to mention that in the case at hand, NO original assessment completed u/s. 143(1) or u/s. 143(3) of the Act and the requirement of fresh tangible material is not a condition precedent for assuming jurisdiction u/s.147 as no return of income has been filed by the appellant u/s. 139(1) of the Act or in response to notice u/s 148 of the Act. This view has also been held by the Hon'ble High Court of Delhi in the case of Indu Lata Rangwala Vs DCIT (2017) 80 Taxmann.com 102 (Delhi) wherein it was held "Whereas in a case where the initial assessment order is under section 143(3), and sought to be reopened within four years from the expiry of the relevant assessment year, the Assessing Officer has to base his reasons to believe that income has escaped assessment on some fresh tangible material that provides the nexus or link to the formation of such belief, in a case where the initial return is processed under section 143(1)
SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR of the Act and an intimation is sent to the assessee, the reopening of such assessment no doubt requires the Assessing Officer to form reasons to believe that income has escaped assessment but such reasons do not require any fresh tangible material 5.5 In other words, where reopening is sought of an assessment in a situation where the initial return is processed under section 143(1) of the Act, the Assessing Officer can form reasons to believe that income has escaped assessment by examining the very return and/or the documents accompanying the return. It is not necessary in such a case for the Assessing Officer to come across some fresh tangible material to form reasons to believe that income has escaped assessment." 5.6 In view of the afore-stated position of law as also held by the various Hon'ble Courts in the judgments cited hereinabove. it is abundantly clear that the information received from the Investigation Wing is tangible material for assuming jurisdiction under the provisions of section 147 of the Act. It is not in dispute that appellant has traded in penny Stock scrip viz. Comfort Intech Ltd. and obtained accommodation entry in the form of Short Term Capital Gain. Even if it is not treated as accommodation entry, the appellant has earned STCG of Rs. 10,05,000/-, he ought to have offered the same as STCG and paid taxes thereon. Therefore, the appellant is non-filer and assumption of jurisdiction u/s. 148 of the Act is valid. 2.4 After having gone through the entire findings recorded by the ld. CIT(A) and also considering the submissions of both the parties, I found at the very outset after analyzing the entire material available on record that the assessee had not raised any such objection regarding assumption of jurisdiction u/s 147 of the Act before the AO during the course of reassessment proceedings. Only after evaluating and verifying the records in data base, it was found and noticed by the AO that the SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR assessee had not filed her return of income. Therefore, under these circumstances, no original scrutiny proceedings had taken place. On the other hand, in my view an information received by the AO from Investigation Wing is enough to form the belief that income has escaped assessment more particularly under the circumstances when the assessee had failed to furnish true and material facts in her return of income. The facts of the present case are altogether different from the facts of the case relied upon by the assessee. In the present case, the information received by the AO is from within the Department which is further based on various enquiries and investigation. Therefore, in such circumstances the AO and the ld CIT(A) while correctly relying upon the facts had rightly concluded that it is abundantly clear that the information received from the Investigation Wing is tangible material for assuming jurisdiction under the provisions of Section. It is not in dispute that the assessee had traded in penny stock scrip viz Comfort Intech Ltd. and obtained accommodation entry in the form of Short Term Capital Gain. Even if assuming the said company M/s. Comfort Intech Ltd is not treated as penny stock company then the assessee who had earned short term capital gain of Rs.10.05 lacs was under the obligation to have offered the same as short term capital gain and paid taxes thereon. After analyzing the entire record, I am of the view that the AO had cogent material in the form of information/ material gathered by the Department during various enquiries and investigations. Further, it is an SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR admitted fact that the assessee had not filed her original return of income and therefore no original scrutiny assessment had been carried out in the present case which shows that no information in respect of transaction was carried or verified. Therefore in my view the said facts are enough for the AO to form the belief that income of the assessee has escaped assessment. The ld CIT(A) has rightly relied upon the decision of Hon’ble Gujarat High Court in the case of :- 1. Aishwarya Dyeing Mills (P) Ltd. vs DCIT 94 Taxmann.com 430 2. MSK Real Estate Pvt.. Ltd 95 Taxmann.com 241 3. Knottenz India Mfg. (P) Ltd vs DCIT 95 Taxmann.com 291 4. Peass Industrial Engineers Pvt.Ltd vs DCIR 73 Taxmann.com 185 5. Pr. CIT – 7 vs Paramount Communication (P) Ltd. (2017) 79 Taxmann.com 409 (Delhi) Therefore, in my view the ld CIT(A) has passed the well reasoned order while dismissing the Ground No. 1 and no interference is required in the order of the ld. CIT(A). Thus Ground No. 1 of the assessee is dismissed. 3.1 In Ground NO. 2 & 3, the assessee is aggrieved that the ld. CIT(A) has erred in upholding the addition u/s 68 and u/s 69C of the Act on the sale of shares Comfort Inech Ltd. and on account payment of commission on sale proceeds. 3.2 Brief facts of the case are that the AO observed that assessee has purchased 1,00,000 shares on 17.08.2010 (Correct date is 15.07.2010) (PB 27) of Comfort SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR Intech Ltd. for Rs.4,00,000/- and the same were sold within a period of less than one month for Rs.14,05,000/-. Accordingly, the AO on the basis of investigation conducted by the DDIT Investigation, Kolkata that it is a penny stock company made certain observations at Page 4 to 13 of the order. The assessee explained that she sold the shares on 17.08.2010 in BSE Ltd. through Share Broker M/s Aanand Rathi Securities Ltd. which cannot be disbelieved. However AO made addition of Rs.10,05,000/- u/s 68 of the Act by treating it as unexplained cash credit. He further made addition of Rs.84,300/- u/s 69C of the Act on account of alleged commission paid @ 6% of the sale value of shares of Comfort Intech Ltd. 3.3 In first appeal, the Ld. CIT(A) at Page 17 to 29 of its order after referring to the various decisions including that in case of Swati Bajaj held that pre-ponderence of probabilities is against the assessee and thus dismissed the ground of the assessee. 3.4 During the course of hearing, the ld. filed the following written submission praying therein to delete the addition confirmed by the ld.CIT(A).
It is submitted that assessee invested in 10,000 shares of Rs. 1 each at a premium of Rs. 3 each in the right issue (PB 14). The payment of Rs.4,00,000/- was made on 15.07.2010 (PB 27) directly to the company. The purchase of shares is not disputed by the lower authorities in as much as he has allowed the deduction of cost of acquisition of the shares.
Thereafter, assessee sold these shares through SEBI registered share broker i.e. M/s Anand Rathi Securities Ltd. vide contract note dt.17.08.2010 for Rs.14,05,000/- but after brokerage and other charges the net amount received is Rs.13,99,744/- which is credited in her account by SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR Anand Rathi Shares and Stock Brokers Ltd. on that date (PB 33) on which STT was paid. Copy of contract note is enclosed. On sale of these shares assessee earned short term capital gain of Rs.9,99,744/- (wrongly taken by the AO at Rs.10,05,000/-). However, since assessee incurred loss of Rs.32,87,005/- in future and option trade carried through M/s Anand Rathi Shares and Stock Brokers Ltd., the gain on sale of shares of Comfort Intech Ltd. is to be adjusted against the loss and thus no income has arrisal to the assessee on sale of these shares.
From the above documentary evidences it can be noted that assessee has discharged her onus to prove the genuineness of purchase of shares and the genuineness of sale of shares. The lower authorities except for relying on the report of investigation wing and the financial statement of Comfort Intech Ltd. have not brought on record any evidence that the assessee has paid cash against the amount received from sale of shares.
Before the Ld. CIT(A) assessee filed the submission and relied on various case laws, However, the Ld. CIT(A) has not controverted the facts and relied on the decision of Kolkat High Court in case of Swati Bajaj, decision of Banglore ITAT in case of Smt. MK Rajeshwari and decision of ITAT Chennai Bench in case of Mrs. Vidya Reddy by not appreciating that the facts of the assessee’s case is entirely different than the facts of these cases in as much as assessee is regularly trading in shares through Anand Rathi Shares and Stock Brokers Ltd. both in NSE & BSE in delivery segment and also in derivatives segment. Thus assessee has genuinely purchased and sold the shares of Comfort Intech Ltd.
As stated above, the transaction entered into by the assessee and the gain arising therefrom is completely genuine. Thus, the assumption of AO that assessee had paid commission of 6% of the sale value of shares of M/s Comfort Intech Ltd. is incorrect and has been made simply on the basis of surmises, conjectures, assumptions and presumptions. There is no material available on record to show any such payment. In fact assessee paid brokerage of Rs.3,000/- on sale of these shares to M/s Anand Rathi Shares and Stock Brokers Ltd as evident from the contract note which is deducted from the sale value of the shares and therefore the addition of Rs.84,300/- made on account of undisclosed commission u/s 69C be deleted. In view of above, addition confirmed by Ld. CIT(A) be directed to be deleted.’’ SMT. LAKSHMI AGARWAL VS ITO, WARD 4(5), JAIPUR 3.5 On the other hand, the ld. DR supported the orders passed by the Revenue Authorities and also relied upon following case laws.
(1) [2022] 139 taxmann.com 352(Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax V. Swati Bajaj (2) [2019] 112 taxmann .com 330 (SC) SUPREME COURT OF INDIA Suman Poddar v Income Tax Officer (3) [2022] 139 taxmann. Com 406(Rajasthan) HIGH COURT OF RAJASTHAN Jawar lal Lunia v. Union of India. (4) [2023] Income Tax Appellate Tribunal, Jaipur Benches" SMC" ITO Ward-5(2) Jarpur Vs. Shakuntala Agarwal (5) [2023] 149 Tаxmann. Com 104(Ahmedabad-ITAT) ITAT Ahemdabad SMC Atmiben Alipitkumar Doshi v. Income-tax officer. (6)[2023] In the INCOME TAX APPELLATE TRIBUNAL" 8" BENCH, AHMEDABAD, Hemil Subhashbhal Shah Samarpan v. DCIT, Ward-5(3)(1) (7) [2023] 151 Taxmann. Com 367(Raipur-Trib.) In the ITAT RAIPUR BENCH SMC 7 Rahul Gupta (HUF) v. Assistant Commissioner of Income- tax (8) [2021] 129 taxmann.com 119(Gujarat) HIGH COURT OF GUJARAT Nishant vilaskumar parekh v. Income-tax officer, Ward-113)