SUBHRA DUGAR,KOLKATA vs. ITO, WARD-33(7), KOLKATA

At the time of hearing, the Ld. Counsel for the assessee pressed the only legal issue challenging the reopening of assessment u/s 147 of the Act on the ground of reassessment is bad in law as the reopening of assessment has been made without any independent application of mind that too on the borrowed satisfaction.

In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee.

After hearing the rival contentions and perusing the material on record, we find that the case was reopened for the reason that the assessee had sold shares of M/s Bakra pratisthan Ltd. a penny stock company and capital gain of Rs. 1,32,40,990/- was declared from the sale of 37500 equity shares which was claimed as exempt u/s 10(38) of the Act. The Ld. Counsel of the assessee referred to the reasons recorded u/s 148(2) of the Act a copy of which is filed at page 7 of PB which states that the assessee has traded in scrip which is a penny stock as per the report of the Investigation Wing. However, we find that the said company did not appear in the list of 84 stocks the details wherein is furnished in the PB from page 60 to 62. We find that in this case no adverse view drawn was drawn by the SEBI even nonetheless the stock remained suspended for some time through SEBI order but ultimately no adverse view was taken by SEBI and the trading on the stock exchange was restored. The ld. Counsel for the assessee relied on the decisions of Hon’ble Calcutta High Court in the case of PCIT vs. Deepa Agarwal in ITAT/47/2022, IA NO. GA/2/2022 dated 07.11.2022 and PCIT vs. Assessment Year: 2012-13 Subhra Dugar Shri Abhay Kr. Jain in ITAT/63/2022 IA No. GA/2/2022 dated 10.11.2022 which have been perused and we find that the assessee case is squarely covered by these decisions. We also note that these decisions of the Hon’ble High Court after the PCIT Vs Swati Bajaj in ITAT/6/2022 & others dated 14.6.2022.

Further we find merit in the contentions of Ld. A.R that the list of penny stocks did not contain this share , therefore, we are not in a position to sustain the orders of authorities below which has not done anything to find out whether the assessee has routed his own money by trading in the said stock. In our opinion, the AO is not free to generalize any inference from the report of Investigation Wing that the stock is a penny stock by ignoring the fact that stock does not even figure in the list of 84 penny stock which has been discussed by the Hon’ble Calcutta High Court (supra). We observe that the ld AO has only relied on the investigation wing report and has not done any enquiry to bring any substantive material on record.In view of the facts, we are inclined to hold that the reopening of assessment by the AO is not as per the provisions of Act and is in fact based on the borrowed satisfaction and also done without any application of mind.

In the result, the appeal of the assessee is allowed.