ITO, WARD-1(1), KOL, KOLKATA vs. M/S. ILLUSION BARTER PVT. LTD. , KOLKATA

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA डॉ. मनीष बोरड, लेखा सदस्य एवं श्री अधनकेश बनर्जी, न्याधयक सदस्य के समक्ष Before DR. MANISH BORAD, ACCOUNTANT MEMBER & SRI ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.: 537/KOL/2023 Assessment Year: 2015-16 ITO, Ward-1(1), Kolkata...........................................................Appellant Vs. M/s. Illusion Barter Pvt. Ltd.………….....................................Respondent [PAN: AACCI 2947 M] Appearances: Department represented by: Sh. L.N. Dash, Addl. CIT(D/R). Assessee represented by: None. Date of concluding the hearing : January 25th, 2024 Date of pronouncing the order : January 30th, 2024 ORDER Per Anikesh Banerjee, Judicial Member: The instant appeal of the revenue was filed against the order of Ld. Commissioner of Income-tax (appeals)-NFAC, Delhi [in brevity ld. ‘CIT(A)’] dated 11.01.2023 passed u/s 250 of the Income Tax Act, 1961 (in brevity the ‘Act’) for assessment year 2015-16. The impugned order was emanated from the order of the ld. Asst. CIT (OSD), Ward-1(2), Kolkata (in brevity the ‘AO’) passed u/s 143(3) of the Act dated 27.12.2017. 2. The assessee has taken the following grounds of appeal:

I.T.A. No.: 537/KOL/2023 Assessment Year: 2015-16 M/s. Illusion Barter Pvt. Ltd. “1. That on the fact and circumstances of the case, the Ld. CIT(A), NFAC, erred in passing the order without considering the corroborating evidences leading to disallowance of the loss in share trading. 2. That on the fact and circumstances of the case, the Ld. CIT(A), NFAC, has not considered as per special order of Board exempting cases involving bogus long term capital gains (LTCG)/short term capital loss (STCL) through penny stocks from monetary limits specified in any circular issued under 268A of the Income Tax Act.” 3. When the appeal was called for hearing, no one appeared on behalf of assessee to represent his case. There is no application for seeking adjournment either. On perusal of record, we find that the hearing is scheduled on 25/1/2024. Previously the dates were fixed number of times. In view of the above and considering the nature of dispute, we proceed to dispose the appeal ex-parte qua the assessee after hearing the learned DR and on the basis of material available on the record. 4. The brief fact of the case is that the assessee is a company and filed return in impugned assessment year by declaring total income amount to Rs. 35,840/-. The assessee in impugned assessment year set off loss of short- term trading loss in quoted share with taxable interest income. The claim of trading loss amount to Rs. 404,159/-. During the assessment the ld. AO has treated the loss as bogus short term capital loss instead of trading loss which was transacted with Cressanda Solutions Limited. After conversion of the trading loss to capital loss, the ld. AO has treated the impugned loss as bogus and was added back with the total income of the assessee. The aggrieved assessee filed an appeal before the learned CIT(A). The learned CIT(A) has accepted assessee’s plea and allowed the appeal by a speaking order. Being aggrieved the revenue file the appeal before us by challenging the apple order. As the issue is related to bogus short-term loss which was treated by revenue has bogus short term capital loss, so the revenue is eligible for filing appeal before that ITAT. 5. The ld. DR vehemently argued and relied on the assessment order. 6. We heard the argument of revenue, considered the available record and orders of the revenue authorities. The addition was made on basis of the Page 2 of 5

I.T.A. No.: 537/KOL/2023 Assessment Year: 2015-16 M/s. Illusion Barter Pvt. Ltd. proposed idea without submitting proper evidence. The relevant part of the assessment order is inserted as below: -

“9. In view of the discussion made above and applicability of preponderance of probability in unveiling a colourable transaction while determining matters under taxing statutes, as repeatedly observed by the Hon'ble Supreme Court in cases referred to above, I hold the loss of Rs. 4,04,159/- claimed to have been suffered by the assessee by trading in shares of Cressanda Solutions Ltd. as bogus and disallow the same. Hence, the sum of Rs. 4,04,159/-, being purported loss from trading in Cressanda Solutions Ltd. is added back to the total income of the assessee. Penalty proceeding u/s 271(1)(c) of the Income Tax Act, 1961, is initiated separately for furnishing inaccurate particulars of income.” 6.1. The observation of the ld. CIT(A) is reproduced as below: -

“5.4 It is also pertinent to note that the appellant was issued various notices u/s 250 of the I.T. Act by the First Appellate Authority to make submissions and file documentary evidences in support of grounds of appeal, but the appellant has not responded to these notices during the appellate proceedings. The, contentions of the appellant have been considered and it is observed from the assessment order that it has been passed u/s 143(3) of the I.T. Act. However, the AO has not considered or discussed the submissions made by the appellant during the assessment proceedings in the assessment order. The AO did not provide any copies of the investigation reports, material gathered and the statements recorded by the Investigation Wing to the appellant before concluding that it was a bogus loss incurred on trading of penny stock shares of M/s. Cressanda Solutions Ltd. Therefore, the AO has not followed the principles of natural justice by providing adequate opportunities to the appellant to explain his case during the assessment proceedings. The AO did not consider the details and evidences submitted by the appellant substantiating the entire transaction of trading of shares of M/s. Cressanda Solutions Ltd. Also, it is observed that the AO has not issued a final show cause proposing the disallowance of trading loss in shares of Rs.4,04,159/- before finalizing the assessment u/s 143(3) of the I.T. Act. The AO has not carried out any kind of independent investigation into the transaction of trading in shares of M/s.Cressanda Solutions Ltd by the appellant. The AO has simply relied upon the general modus operandi adopted by the penny stock companies as discussed by the report of the Kolkatta Investigation Wing. The AO should have conducted an independent investigation into the trading in shares of M/s. Cressanda Solutions Ltd and his findings should have been incorporated in the assessment order. The AO relied upon the decision of the Hon'ble Supreme Court in the case of Sumati Dayal (214 ITR 801) and Durga Prasad More (82 ITR 540), however, these judgements are not applicable to the instant case as the AO has not”

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I.T.A. No.: 537/KOL/2023 Assessment Year: 2015-16 M/s. Illusion Barter Pvt. Ltd. 6.2. The entire addition is on assumption basis. In assessment the ld. AO unable to bring any evidence that the transaction related the sales of share is the fraudulent or related to any penny stock transaction. The assessee was unable to submit the evidence before the 1st appellate authority. There is lack of verification from the end of the revenue. We find it fit to remit the matter back to the file of the ld. CIT(A) for his objective and meritorious observations and findings on the submissions made by the assessee. Needless to say the assessee be given reasonable opportunity of being heard and the assessee shall also be cooperating for the effective disposal of the appeal and will be at liberty to make further submissions as deem fit. Since the matter is restored to the file of the ld. CIT(A) for meritorious adjudication by passing a speaking order in terms of our observations made hereinabove, we are not expressing any views on the merits of the case so as to limit the appellate procedure before the d. CIT(A). The observations herein made by us in remanding the matter back to the file of Ld. CIT(A) will not impair or injure the case of the Revenue nor will it cause any prejudice to the defence/explanation of the assessee. Accordingly, we set aside the impugned order of the Ld. CIT(A) and restore the matter back to the file of the Ld. CIT(A) to decide afresh after affording reasonable opportunity of being heard to the assessee and the assessee is directed to be diligent in the appellate proceedings. 7. In the result, the appeal filed by the revenue in ITA No. 537/KOL/2023 is allowed for statistical purpose. Kolkata, the 30th January, 2024.

Sd/- Sd/- [Manish Borad] [Anikesh Banerjee] Accountant Member Judicial Member Dated: 30.01.2024 Bidhan (P.S.)

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I.T.A. No.: 537/KOL/2023 Assessment Year: 2015-16 M/s. Illusion Barter Pvt. Ltd. Copy of the order forwarded to: 1. ITO, Ward-1(1), Kolkata. 2. M/s. Illusion Barter Pvt. Ltd., 61, Kali Krishna Tagore Street, 1st Floor, Kolkata-700 012. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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