REENA JAIN,KOLKATA vs. ITO, WARD-37(1), KOL, KOLKATA
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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri Sonjoy Sarma & Shri Girish Agrawal]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘SMC’, KOLKATA [Before Shri Sonjoy Sarma, Judicial Member & Shri Girish Agrawal, Accountant Member] I.T.A. No. 503/Kol/2023 Assessment Year : 2015-16 Reena Jain Vs. ITO, Ward-37(1), Kolkata PAN: AGBPJ 3829 R Appellant Respondent Date of Hearing 01.01.2024 Date of Pronouncement 09.01.2024 For the Assessee Shri Sunil Surana, AR For the Revenue Shri A.K. Bandyopadhya, Addl. CIT ORDER Per Sonjoy Sarma, JM: This appeal of the assessee for the assessment year 2015-16 is directed against the order dated 17.03.2023 passed by the ld. Commissioner of Income-tax, Appeals, NFAC, Delhi [hereinafter referred to as ‘the ‘ld. CIT(A)’]. The assessee has raised the following grounds of appeal:
“1. For that the assessment is bad in law since the all the proceedings followed by issue of notice u/s 148 by ITO, Ward-37(3) is without jurisdiction and bad in law when the jurisdiction of the case was with the ITO, Ward-45(1), Kolkata. 2. For that on the facts and in the circumstances of the case the proceedings u/s 148 is bad in law and not maintainable. 3. For that the ld. CIT(A) erred in accepting the proceedings initiated by AO simply on the basis of some vague information received from investigating wing without any tangible material or making any independent enquiry or examination as to the authenticity thereof simply on suspicion and surmises is not maintainable. 4. For that the proceedings initiated u/s 147 in the instant case is otherwise bad in law since the copy of approval u/s 151 taken from the specified authority i.e., range 37 was not provided in spite of specific requests and even otherwise the same was mechanical in nature.
2 ITA No. 503/Kol/2023 AY: 2015-16 Reena Jain 5. For that the re-assessment is bad in law since reasons of reopening supplied were only the extract not the full exact copy of reasons recorded during the course of proceedings. 6. For that on the facts and circumstances of the case the ld. CIT(A) erred in confirming the addition made by AO of Rs. 9,16,444/- u/s 68 to the total income which was not justified.” 2. Brief facts of the case are that the assessee is an individual filed its return of income for the year under consideration declaring total income at Rs. 2,62,040/- showing income from short-term capital gains from trading in share/mutual funds, capital gains on sale of other assets and also claimed to have earned exempt income being long-term capital gains from transactions on which securities transactions tax has been paid. In the case of assessee, information was received by the AO that the assessee had received accommodation entry of bogus LTCG and on a perusal of ITBA data, it was revealed that the assessee has received accommodation entry to the tune of Rs. 9,16,444/- from trading in penny scrip of ‘NYSSA CORPORATION LTD’ during the relevant year. Therefore, the proceedings u/s 148 of the Act drawn against the assessee seeking necessary approval from the competent authority. The ld. AO further issued statutory notice u/s 142(1) and 143(2) of the Act to the assessee. However, assessee did not file any supporting documents / evidences such as relevant bank account statement, D-mat account statement and the ld. AO treated the entire amount of Rs. 9,16,444/- as unexplained sum u/s 68 of the Act in the hands of assessee. 3. Dissatisfied with the above order, assessee went into the appeal before the ld. CIT(A) where the appeal of the assessee was dismissed.
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Aggrieved by the above order, assessee is in appeal before the Tribunal raising multiple grounds of appeal. However, the main grievance of the assessee is challenging the validity of assessment on the ground that reasons recorded by the AO for reopening of the assessment lacks the individual application of mind by the AO and the same were recorded in a mechanical manner without carrying out any enquiry and were in fact based upon the borrowed satisfaction. The ld. AR drew our attention to the copy of reasons recorded at page no. 15 & 16 of the paper book. For the sake of ready reference, the same is reproduced below: “The assessee Reena Jain, ( PAN: AGBPJ3829R ) furnished her return of Income for A.Y.2015-16 on 27-08-2015, having total income of Rs.02,62,040/-. The return of income was duly processed on 02/11/2015 at an assessed income of Rs. 02,62,040/-.
A credible information has been provided in respect of assessee through ITBA in respect of accommodation entry of Bogus LTCG/STCL/Business Loss at the platform of Bombay Stock Exchange(B SE)/National stock Exchange(NSE)/Calcutta Stock Exchange(CSE) which is as under:
A search & seizure operation was carried out on many entry & Hawala Operators at various locations of the country on 19/03/2019 which was conducted on 21/03/2019. It was found that these entry providers were involved in providing entries of bogus LTCG/STCL/Business Loss through manipulation of Stock prices on the stock exchange.
Once the beneficiaries approaches the person dealt with, these persons arranges to give benefit in the disguise of LTCG/STCL/Business loss etc. The value of cheque & the brokerage/commission are actually made in cash which was routed through several Jama Kharchi entities & finally Cheque is received by beneficiaries.
Deep perusal of the information infers that bribed the actual transactions start taking place there are brokers in different town who contact prospective client
4 ITA No. 503/Kol/2023 AY: 2015-16 Reena Jain sand take paper booking for entries. The commission to be paid to the operators is decided at this stage however, no money is paid. Once the booking is complete the operators have a reasonably good idea of how much LTCG is to be provided along with the break-up of individual beneficiaries. The activities were carried out for more than one year so that beneficiary can claim the loop holes of the Income tax Act by claiming exemption of section 10(38) of the Act. As per this section, if any individual/HUF holds any share for more than one year, then the gain team the said transactions on shares is allowed as exempt income.
On perusal of the ITBA data it revealed that the assessee Reena Jain has also received accommodation entry to the tune of Rs. 9,16,444/- from trading in penny scrip of “NYSSA CORPORATION LTD.” during the F.Y. 2014-15.
On perusal of information passed on & available on records, it is clear that various entry operators and their associates has created a syndicate through which they took cash through different bank A/c. and in return issued cheque to the assessee as sale value of the share scrips of “NYSSA CORPORATION LTD. Certain entry during the course of search & survey operations has accepted during deposition u/s.131 of the Act that they were indulged in malpractice in order to create capital gain/loss/business loss which ware bogus in nature.
On examination of return for the A.Y 2015-16, it is noted that the assessee has claimed an exempt income of Rs. 63,938/- which is mentioned in Schedule-EI. Though as per report the assessee has earned much more LTCG but didn't disclosed such exempt income which indicates the intention of the assessee to conceal this fact from the eye of the department, because bring a beneficiary he has also became a part of the syndicate/racket. That means the assessee during the year received this income by alleged sale of penny stock which is nothing but bringing back of assessees own unaccounted income in the guise of LTCG through arranged transaction with the promoter/broker and mediator. The process was going for just to cover one year from its purchase. As a consequence, the assessee claimed this income as exempted tactfully by utilizing the loop holes of section 10(38) of the Income Tax Act. On examination of detailed report, it is found that these transactions was dubious in nature and everything was done in connivance of entry operator, broker and other middleman beginning from purchase to sale and also financial transaction among them. The scripts of the shares are seldom traded and it is under the control certain person/ group of persons. Until and unless there is understanding between the parties, it was not possible to acquire those shares by the assessee. Therefore, everything was an arrangement by controller/entry operator/broker to make the transaction a legal colour to show it as a genuine
5 ITA No. 503/Kol/2023 AY: 2015-16 Reena Jain transaction so that the purchaser of stock and seller of stock both are benefited by these dubious transactions.
On examination of return for the A.Y. 2015-16, it is noted that the assessee has claimed an exempt income of Rs. 63,938/- which is mentioned in Schedule-EI. Though as per report the assessee has earned much more LTCG but did not disclosed such exempt income which indicates the intention of the assessee to conceal this fact from the eye of the department because being a beneficiary he has also became a part of the syndicate/racket. That means the assessee during the year received this income by alleged sale of penny stock which is nothing but bringing back of assessee’s own unaccounted income in the guise of LTCG through arranged transaction with the promoter/broker and mediator. The process was going for just to cover one year from its purchase. As a consequence, the assessee claimed this income as exempted tactfully by utilizing the loop holes of section 10(38) of the Income Tax Act.
Based on the above, I have a concrete belief that actually there was no gain which is admissible as exempt from tax, it is nothing but colourable arrangement to evade tax and therefore reopening of assessment is warranted in this case.
As such the long term capital gain of the assessee was not raised automatically in normal procedure but was created intentionally pushing back the liability to an exit provider and the same is a considered as shell company by providing its dummy directors, there is no way but only to consider that the assessee willfully evade tax by furnishing inaccurate particulars of income/details it should offer the income as earned from selling of shares. The entire amount of receipt towards alleged sale of the scrips of NYSSA CORPORATION LTD. through exchange in connivance with the entry operators & others associated are actually the income of the assessee.
Therefore, I have reasons to believe that for the A.Y. 2015-16, income chargeable to tax to the tune of Rs. 9,16,444/- has escaped assessment. Hence, the provision of section 147 of the Income Tax Act, 1961 is attracted to this case.
In this case no assessment was made u/s 143(3)/147 of the Act. Only procession of return u/s 143(1) was done.
In view of the above findings, the provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is needed to be a case where income chargeable to tax has escaped assessment.
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This case is within four years from the end of the assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 is requested before Addl. CIT as per the provisions of section 151 of the Act. Put up before the Addl. CIT, Range-37, Kolkata for his kind perusal and necessary approval of issuing notice u/s 148 of the Income-tax Act, 1961 for the A.Y. 2015-16 as required u/s 151 of the Income Tax Act, if deemed fit.”
We observe from the perusal of the above reasons that in the first two paras the ld. AO has discussed the information received from the ITBA data that assessee was having transactions to the tune of Rs. 9,16,444/- from trading in penny scrip of ‘NYSSA CORPORATION LTD’ during the F.Y. 2014-15 and thereafter in third paragraph the AO has noted that the assessee has claimed an exempt income of Rs. 63,938/-. It was also noted that though the scrutiny was done in this case on the basis of information available in the e-filing records. It was earned much more LTCG but did not disclose such exempt income which indicates the intention of the assessee conceal this fact from the eye of the department. Thereafter, the AO re- assessed the income of the assessee under the provisions of section 147 of the Act making an addition of Rs. 9,16,444/- in the hands of assessee which is not sustainable according to ld. AR. We find merit in the contentions of the ld. AR that the AO has recorded the reasons based on the borrowed satisfaction without application of mind and without carrying out any enquiry into case. We also note that assessee filed Schedule-EI which contained the details of exempt income earned during the year by the assessee disclosing sum of Rs. 63,938/- as long term capital
7 ITA No. 503/Kol/2023 AY: 2015-16 Reena Jain gain from the transaction. Thus the AO noting in the reasons that the assessee has not disclosed the capital gain in the return of income is also not correct by making an addition of Rs. 9,16,444/- in the hands of assessee. In our opinion, the ld. AO has acted on the borrowed satisfaction without recording his own satisfaction and belief that income of the assessee has escaped assessment. The case of the assessee finds support from the decision of the Hon’ble Delhi High Court in the case of PCIT vs meenakshi Overseas (P) Ltd. reported in (2017) 395 ITR 677 (Delhi).
In view of the above and the ratio laid down by the Hon’ble High Court, we are inclined to quash the assessment framed by the AO as the same lacks of any independent application of mind and is based upon the borrowed satisfaction of the Investigation Wing.
In the result, the appeal of the assessee is hereby allowed.
Order pronounced in the open court on 09.01.2024. Sd/- Sd/-
(Girish Agrawal) (Sonjoy Sarma) Accountant Member Judicial Member Dated: 09.01.2024 Biswajit, Sr. PS
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Copy of the order forwarded to: 1. Appellant- Reena Jain, 4C, Ram Tanu Bose Lane, Kolkata- 700007. 2. Respondent – ITO, Ward-37(1), Kolkata. 3. Ld. CIT 4. Ld. CIT(A) 5. Ld. DR True Copy By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata
