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Judgment
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 01.01.2025 of the Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN &Order No : ITBA/NFAC/S/250/2024-25/1071770358(1) arising out of the order dated 29.03.2023 u/s 147r.w.s144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Assessment Centre, Delhifor AY: 2015-16.
The assessee had filed return of income on 29.08.2015 declaring therein net income of Rs.18,89,020/- besides claiming exemption u/s 10(38) of the Act for Rs.34,06,000/- in respect of LTCG earned on the sale of shares of M/s Virtual Global Education. The case of the assessee was taken up for scrutiny by issuing of notice u/s 148 of the Act and the assessment has been completed on a total income of Rs.52,95,020/-vide the impugned assessment order by making addition on account of disallowance of LTCG. The same was challenged before the ld. CIT(A) who has sustained the disallowance for which assessee is in appeal before this Tribunal and has raised following Grounds:
“1.That on the facts of the case, in law and under the circumstances, the Hon'ble Commissioner of Income Tax (Appeal), NFAC, Delhi erred in confirming the action of the assessing officer to pass an assessment order under section 147/144 read with section 144B of the Act without serving proper and legal notice under section 148 of the Act. The notice issued is barred by limitation and is not a legal notice in the eyes of law.
1a.because the notice under section 148 issued by the income tax officer ward 2(1)(1) has been neither digitally signed nor otherwise.
1b. because the mail containing the attached notice under section 148 of the Act had been received by the appellant on 01.04.2021 only and as such it is illegal, unjustifiedand barred by limitation.
1c.because the assessment framed in the absence of proper and legal service of notice under section 148 of the Act is unjustified, unwarranted and bad in law.
2.That on the facts of the case, in law and under the circumstances, the Commissioner of Income Tax (Appeal), NFAC, Delhi erred to confirm the addition made by the assessing officer by disallowing exemption of Rs. 34,06,000/- as claimed under section 10(38) the income Tax Act 1961 in respect of Long-Term Capital Gain without appreciating the facts and the evidence placed on records.
2a.because the assessing office in face less assessment proceedings failed to appreciate the fact that the company M/S Virtual Global Education is an existing and well-established company having its presence in many states.
2b.because the assessing officer failed to appreciate the fact that the shares of thecompany namely M/S Virtual Global Education are being traded frequently and the rise and fall in prices is essentially connected with the stock trading,
2c. because the assessing officer in the face less assessment proceedings failed to issue the mandatory notice under section 142(1) of the Act before making addition to the income of appellant by disallowing available exemption under section 10(38),
3.That on the facts of the case and in law, the assessing officer erred and went wrong to issue notice for the levy of penalty under section 271(1)(c) of the Act.
4.That the appellant craves, leave to add, alter, amend, substitute, delete and modify any or all the grounds, which are without prejudice to one another, before or at the time of hearing of the appeal.”
At the time of hearing ld. Counsel primarily argued on the ground No. 1 by which assessee has challenged the assumption of jurisdiction u/s 147/148 of the Act by asserting that the provision of law have not been complied with and more particularly that the reasons for reopening are merely assertive of the investigation wing report and there is no application of mind.
Ld. DR has however, submitted that reasons sufficiently disclosed all the material facts.
We have considered the rival contention and gone through the material on record and for convenience of disposal of ground No. 1 we reproduce the reasons recorded for reopening of the case which are part of annexure of the notice:
Now very apparently the aforesaid reasons do not even mention as to what was the nature of transaction giving rise to escapement of income whether it was sale or purchase of the sale and more particularly which scrip. Very apparently there is reliance of the investigation wing information alone to which in pretentious manner assessing officer adds ‘I by independent reason have reason to believe that there has been escapement of income on this count’
There are no allegation that the sale/purchase of the shares are part of any independent investigation and inquiry in which the scrip involved was found part of modus operandi or at any stage before the issue of notice the investigation wing or assessing officer had gone through the assessee’s claim and from the same anything suspicious was found to record escapement of income. The fact that assessing officer records in these reasons that assessee has not filed ITR for AY: 2015-16 itself shows that Assessing Officer was not aware of the record and before us copy of ITR AY: 2015-16 filed on 29.08.2015 has been filed. The computation of total income mentions of the exempt income in the form of LTCG giving details of the transaction. Ld. counsel has drawn our attention to the fact that shares are purchased on 11.02.2013 by banking mode transaction payments to M/s Natraj Capital and Credit Pvt. Ltd. Subsequently, this 40,000 shares was split in 1:10 and the 40,00,000 shares were thus, made part of demat account and subsequently sold during the financial year through stock exchange. All these aspects could have been very much examined on the basis of assessment record. However, without application of mind and recording reasons on the basis of mere reliance of the investigation wing information, which too was not concrete or crystal clear,powers u/s 147/148 of the Act was invoked which is not sustainable in law.
Accordingly, we sustain ground No. 1 and allow the appeal of the assesse. The impugned reassessment is quashed.