AI Structured Summary
Not yet generated for this judgment
Judgment
PER S. RIFAUR RAHMAN,AM:
The assessee has filed appeal against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 30.06.2025 for the Assessment Year 2014-15.
Brief facts of the case are, AO observed that the assessee has filed her return of income for AY 2014-15 declaring income of Rs.3,11,900/- and assessee has declared income under the head Profits and Gains from Business and Profession. As per the information available with him, he observed that search and survey action was carried out on Tradenext Securities Limited (erstwhile Lifeline Securities Ltd.) along with one beneficiary of LTCG exempt under section 10 (38) of the Income-tax Act, 1961 (for short ‘the Act’), Kundu Group of Rohtak. During the course of investigation, it was revealed that the group provides accommodation entries of bogus LTCG through reputed stocks by forging the ante dated contract notes. Based on the above material available on record, reasons to believe was recorded that income of the assessee chargeable to tax has escaped assessment within the meaning of section 147 of the Act. After recording the reasons and obtaining the approval, a notice u/s 148 was issued and served on the assessee. In response, assessee filed return of income on 30.11.2021. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. Various notices were issued through e-portal for the reason that the case of the assessee was transferred to faceless assessment on 11.12.2021. Since assessee has not furnished the details as called for, the AO proceeded on the basis of material available on record and the AO heavily relied on the information received from DDIT Investigation, Rohtak and modus operandi adopted by Lifeline Securities Ltd. Based on the detailed findings of Investigation Wing, he came to the conclusion that assessee is the beneficiary of LTCG and accordingly, he proceeded to make the addition u/s 69A to the extent of Rs.96,97,914/- and also proceeded to make 2% of the above as commission towards obtaining bogus entries.
Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed detailed written submissions which are reproduced at pages 4 to 13 of the appellate order. After considering the detailed submissions, ld. CIT (A) sustained the addition made by the AO with the following observations :-
“6.1Ground No.1 to 12: In these grounds the appellant has challenged the addition worth Rs.9891875/- as unaccounted money u/s 69A of the Income Tax Act and Rs. 193958/- on account of bogus commission paid u/s 69C of the Income Tax Act. The case was reopened u/s 147 of the Income Tax Act after the receipt of information from the Investigation Wing at Rohtak that the appellant had made investment in a Penny Stock company M/s. Tradenext Securities Ltd (Erstwhile Lifeline Securities Ltd). The AO has analyzed the background and the working of the company from pages 03 to 16 of the assessment order. The AO has clearly made out the case that it is a penny stock company and the artificially, the stock has been manipulated to give maximum benefits to the beneficiaries. The AO has analyzed the modus operandi of the sale company from pages 03 to 16 of the assessment order. The AO has also relied upon the statements of different members of Kundu Group like Mr. Rakesh Sobal and Mr. Pradeep Kumar Nehra. The AO analyzed and came to the conclusion that M/s. Tradenext Securities Ltd (Erstwhile Lifeline Securities Ltd) is a shell company and is giving bogus L TCG to the beneficiaries and hence AO has made the addition.
6.1.1Now before me in the appellate proceedings, the appellant has filed written submission. From the submissions of the appellant, the creditworthiness of the company along with the genuineness of the transaction with M/s. Tradenext Securities Ltd (Erstwhile Lifeline Securities Ltd)have not been proved. The appellant has relied upon the various case laws, to substantiate its argument and also the appellant has challenged the worth Rs.9891875/- as unaccounted money u/s 69A of the Income Tax Act and Rs.193958/- on account of bogus commission paid u/s 69C of the Income Tax Act. Since this is a clear cut case of bogus LTCG given by the appellant and there are so many decision in the favour of the revenue on this issue. The AO has relied upon the decision of Hon. SC in the case of PCIT vs NRA Iron and Steel on identical issue the decision of Hon. Kolkata HC in the case of PCIT vs Swati Sajaj has been confirmed by Hon. SC in the case of bogus L TCG. Similarly, the decision of Hon. Delhi HC in the case of Suman Poddar vs ITO has been confirmed by Hon SC again in the case of bogus L TCG. Hence the additions of the AO are confirmed and appeal of the appellant is dismissed.”
Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
“1.On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.
2.On the facts and circumstances of the case and in law, the reassessment proceedings in initiated is bad-in-law, without jurisdiction and contrary to the provisions of law including the specific provisions of section 147 to section 151 A of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.
4.On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is bad-in-law, without jurisdiction and barred by limitation and CIT(A) erred in not holding so.
5.On the facts and circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition made by the assessing officer of Rs.98,91,875/- on the account of sale consideration of shares u/s 69 A of the Act.
6.On the facts and circumstances of the case and in law, the additions made by the assessing officer is beyond the scope of provisions of section 148/147 of the Act, and, therefore, the addition made is liable to be deleted and CIT(A) erred in not holding so
7.On the facts and circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition made by the assessing officer of Rs.1,93,958/-on the account of alleged commission paid u/s 69C of the Act.
At the time of hearing, ld. AR of the assessee brought to our notice pages 16 and 17 of the paper book which is the reasons recorded to open the assessment u/s 148 of the Act. He submitted that the above reasons recorded by the AO is vague and has not mentioned any name of the scrip which can be termed as penny stock. He submitted that the AO has merely relied on the findings of Investigation Wing, Rohtak without bringing on record any material against the assessee. He submitted that assessee has not traded any of the stock claimed to have been penny stock. He submitted that assessment was completed on the basis of vague reasons.
On the other hand, ld. DR of the Revenue brought to our notice page 14 of the first appellate order and submitted that Lifeline Securities Ltd. was indulged in manipulating contracts and he brought to our notice detailed findings of ld. CIT (A) and he relied on them.
Considered the rival submissions and material placed on record. We observed that the AO has heavily relied on the detailed findings of Investigation Wing, Rohtak and it was found that Lifeline Securities Ltd. has indulged in penny stock and also found in manipulating contracts and they had relied upon the statement of different members of Kundu Group like Rakesh Bobal and Pradeep Kumar Nehra and in our considered view, AO has not brought on record any material relevant to the assessee. Without there being any material against the assessee and also AO has proceeded to record vague reasons to believe that there is escapement of income. The Hon’ble Courts have held that without recording proper reasons to believe the proceedings u/s 147 cannot be initiated. In the present case, there is no material available with the AO to initiate the proceedings u/s 147 of the Act and even the assessment was completed on the basis of abovesaid vague reasons. Therefore, the AO has no jurisdiction to initiate the proceedings u/s 148 of the Act in the present case. Accordingly, the appeal filed by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.