ARCHANA JAIN,JAIPUR vs. ITO WARD-3(5), JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 25-11-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2011-12 wherein the assessee has raised the following grounds of appeal. ‘’1. Under the facts and circumstances of the case, the proceedings initiated u/s 148 of the I.T. Act, 1961 is void ab-initio deserves to be quashed because the action has been taken on the basis of reasons recorded u/s 148 of the I.T. Act, 1961 which are not related to the assessee.

2.1 During the course of hearing, the ld. AR of the assessee has not pressed the Ground No.1. Therefore, the same is dismissed being not pressed. 3.1 During the course of hearing, the ld. AR of the assessee has taken up ground No. 2 & 3 for arguments before the Bench praying therein the ld. CIT(A) has erred in confirming the addition u/s 68 of the Act amounting to Rs.6,78,673/- for arranging bogus capital loss which was not related to the assessee and treating it as undisclosed income and further erred in confirming the addition u/s 68 of the Act amounting to Rs.4,05,389/- on presumption basis and treating it as unexplained cash credit. 3.2 Apropos Ground No. 2 & 3 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-

3 SMT. ARCHANA JAIN VS ITO, WARD 3(5), JAIPUR ‘’8.4 The appellant has taken a bogus accommodation entry from the broker and has infused her unaccounted money amounting to Rs. 6,78,673/- into it. The appellant channelized the bogus entry through her bank account to give this entry the colour of legitimate income from penny stock trading. The broker has also admitted that the broker also used to issue the contract notes after modifying the client details. The modus operandi adopted by the broker and the details of the transactions arranged by the broker for these parties included the appellant also. 8.5 I have carefully examined the issue. During the appeal under consideration, no further documentary evidence, whatsoever, has been produced to prove the genuineness of the transaction. Apart from written. submission, the appellant has produced copies of documents in appellant's submission. I have examined these documents. Instead of supporting the case of appellant, these documents only reinforces the findings of the AO which are based on his detailed analysis of the facts and circumstances of the case. 8.6 In view of the facts and circumstances borne out of the assessment order as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions. It is revealed that the amounts received by the appellant are the result of arranged transactions to introduce its own unaccounted income through entry providers with the sole motive to account for the undisclosed income. The AO's action in quantifying and adding such unexplained money towards procurement of such accommodation entries at Rs 10,84,062/- 8.7 In view of the above discussion and the judicial precedents, it is held that the AO was justified in making addition of Rs.10,84,062/- of the I.T. Act. Accordingly, addition made by the AO is confirmed and the grounds of appeal are dismissed.’’ 3.3 During the course of hearing, the ld. AR of the assessee prayed that the additions so sustained by the ld. CIT(A) amounting to Rs.10,84,062/- (i.e. Rs.6,78,673/- & Rs.4,05,389/- should be deleted for which the ld. AR of the assessee has filed the detailed written submission as under:-

4 SMT. ARCHANA JAIN VS ITO, WARD 3(5), JAIPUR ‘’1. The brief facts of the case are that the appellant derived her income from Salary and Other Sources and filed her return declaring loss of Rs. 78,284/- on 22.03.2012. (PB No. 1) 2. The appellant had received Salary of Rs. 1,95,000/- from M/s. Maxwell India during the year under consideration. The assessee had also received Interest from SB A/c Rs. 2,427/- and interest from M/s Maxwell India Rs. 36,000/- on Unsecured loan being total income from Other Sources was Rs. 38,427/-. But due to lack of knowledge in the original ITR the assessee had claimed negative income from Other Sources wrongly by deducting interest paid Rs. 3,11,711/- on unsecured loan, accordingly income from Other Sources was shown Rs. (-) 2,73,284/-. (PB No. 2) 3. In the return filled u/s 148 the above mistake was rectified and above Income from Other Sources of Rs. 38,427/- was shown correctly. (PB No. 6) 4. It is important to mention here that the appellant raised objection for initiating proceedings u/s 148 on the basis of reasons recoded by the Ld. AO (PB No. 8), whereby the appellant submitted that the reasons mentioned by the Ld. AO does not belongs to the appellant. (PB No. 40) 5. During the year under consideration the appellant had not traded in penny stock company M/s. Swarnsarita Gems Ltd. (formerly known as Shyam Star Gems Limited) mentioned in the reasons recorded for reopening of assessment.

6 SMT. ARCHANA JAIN VS ITO, WARD 3(5), JAIPUR 6,78,673/- from trading in penny stock company M/s. Swarnsarita Gems Ltd during the year under consideration. (PB No. 45) 11. It is also amply clear from the Transaction/Bill Report of Broker-Anand Rathi that No transactions/records found for the period from 01.04.2010 to 31.03.2011. This further more proves that the appellant has not taken any bogus loss of Rs. 6,78,673/- from trading in penny stock company M/s. Swarnsarita Gems Ltd during the year under consideration. (PB No. 46) 12. It is further more clear from the Sauda Summary Report of Broker-Anand Rathi that No transactions/records found for the period from 01.04.2010 to 31.03.2011. This further more proves that the appellant has not taken any bogus loss of Rs. 6,78,673/- from trading in penny stock company M/s. Swarnsarita Gems Ltd during the year under consideration. (PB No. 47) 13. It is also important to mention that the Ld. AO has not given any proof that the said transaction belongs to the appellant. The Ld. AO has only reiterated that: “As per information available with this office as received from investigation wing after collecting from BSE, you have booked loss of Rs. 6,78,673/- during the year under consideration in respect of M/s. Swarnsarita Gems Ltd, but you have shown loss of Rs. 2,73,284/- in original ITR filed in Sahar TR-1 on 22.03.2012. Therefore, it can be inferred that you had income of Rs. 4,05,389/- from other sources and after adjusting bogus transaction by taking accommodation entry which was set off from income under the head income from other sources and loss was declared by you in original return. Therefore, the sum of Rs. 4,05,389/- being unexplained cash credit is added u/s 68 to the total income.”

8 SMT. ARCHANA JAIN VS ITO, WARD 3(5), JAIPUR Rs.6,78,673/- & Rs.4,05,389/-). The relevant observation at para 4 of AO’s order concerning the addition of Rs. 10,84,062 is as under:- “ 4……As per information available with this office as received from investigation wing after collecting from BSE, you have booked loss of Rs. 6,78,673/- during the year under consideration in respect of M/s. Swarnsarita Gems Ltd, but you have shown loss of Rs. 2,73,284/- in original ITR filed in Sahar TR-1 on 22.03.2012. Therefore, it can be inferred that you had income of Rs. 4,05,389/- from other sources and after adjusting bogus transaction by taking accommodation entry which was set off from income under the head income from other sources and loss was declared by you in original return. Therefore, the sum of Rs. 4,05,389/- being unexplained cash credit is added u/s 68 to the total income.” However, the ld. CIT(A) has confirmed the action of the AO as to the additions made by the AO u/s 68 of the Act. From the records available before us, it is noted that the AO has nowhere in the assessment order had given proof that the said transactions belong to the assessee. It is also noted from the written submissions of the assessee whereby the assessee has furnished complete details of all the entries in the bank statement (supra). It is also noted from the available records that the assessee had not traded in penny stock company M/s. Swarnsarita Gems Ltd. (formerly known as Shyam Star Gems Ltd.) which is also mentioned in the reasons recorded for reopening of assessment. It is also noted from the Bank Statement of HFDC Bank Statement (supra) that there is no mention/ indication or involvement of the assessee in dealing in penny stock of M/s. Swarnsarita Gems Ltd. (formerly known as Shyam Star Gems Ltd.). We have also meticulously gone through the HDFC Bank Statement of the assessee where there is no glimpse of the assessee in the trading of penny stock with M/s. Swarnsarita Gems Ltd. (formerly known as 9 SMT. ARCHANA JAIN VS ITO, WARD 3(5), JAIPUR Shyam Star Gems Ltd.). It is also noteworthy to mention that the assessee has not taken any bogus loss of Rs.6,78,673/- from trading of penny stock company M/s. Swarnsarita Gems Ltd during the year under consideration. It is also noted that the AO had made further addition of Rs.4,05,389/- for which the ld.AR of the assessee vide letter dated 16-11-2018 submitted that the assessee had claimed negative income from other sources Rs.(-) 2,73,284/- wrongly by deducting interest paidRs.3,11,711/- on unsecured loan. No other transaction was made in BSE or with M/s. Swarnsarita Gems Ltd during the year under consideration by the assessee. Hence, it is not justified to add Rs.4,05,389/- (Rs.6,78,673 minus Rs.2,73,284/- i.e. Rs.4,05,389/-) u/s 68 to the total income of the assessee as the assessee had neither booked any loss nor made any transaction as mentioned in your notice.It is noted from the available records that the AO did not provide any proof as to the additions of Rs.10,84,062/- (i.e. Rs.6,78,673/- & Rs.4,05,389/-) and it does not show any dealing in the penny stock M/s. Swarnsarita Gems Ltd. The addition sustained by the ld. CIT(A) on both the amounts does find merit to concur with his order passed herein above. Hence, in view of the above deliberations, the Ground Nos. 2 and 3 of the assessee are allowed. 4.1 As regards the ground No. 4 of the assessee is concerned for making addition of Rs.10,84,062/- by the AO as undisclosed income u/s 68 of the Act, the Bench noted that when it has not been established by the AO that the assessee in