2022 (5) TMI 1353 - HC - Income Tax

Reopening of assessment u/s 147 - bogus LTCG/STCL - penny stock purchases - Whether there was no failure on the part of the Petitioner to fully and truly disclose material facts and information before the Assessing Officer during original assessment proceedings.? - HELD THAT - As this Court finds that it contains a detailed report vis-a-vis beneficiaries of bogus LTCG/STCL pertaining to the Financial Year 2012-13 (Assessment Year 2013-14). The scrip sold by the Petitioner i.e. Mahanivesh (India) Ltd. is a subject matter of the said report. The report concludes that Mahanivesh (India) Ltd. is a penny stock and that the share price of Mahanivesh (India) Ltd. has been manipulated and bogus profits and losses have been booked in the name of the beneficiaries by trading in the scrip. The Petitioner has been identified and enlisted in the said report along with other beneficiaries. Thus this Court is of the view that despite lapse of four years and a scrutiny assessment, there is fresh tangible material in the present case in the form of information of beneficiaries of bogus LTCL/STCL report prepared by the office of Deputy Director of Income Tax (Investigation) which reveals that Mahanivesh (India) Ltd. is a penny stock whose share price was manipulated in trade by way of a complex web of pre-arranged or artificial transactions to book long term/short term capital gain/loss to the beneficiaries. It is also stated in the said report that the petitioner-assessee was involved in the trade of penny stock, inasmuch as, it had sold shares of Mahanivesh (India) Ltd. in the concerned assessment year. Consequently, this Court is of the view that the present case is not a case of change of opinion. Accordingly, the judgment of the Supreme Court in Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT is not applicable to the present case. Consequently, as the file produced by the Assessing Officer has a note wherein, the Principal Commissioner of Income Tax has granted his approval/sanction and the said document has not been challenged as forged or fabricated, this Court is of the view that prior sanction is on record. Keeping in view the aforesaid, this Court is of the view that the matter requires no interference in writ jurisdiction.

Summary

Issues:
Challenge to notice under Section 147 of the Income Tax Act and re-assessment order.

Analysis:
The petitioner challenged a notice issued under Section 147 of the Income Tax Act, 1961, and a re-assessment order. The petitioner argued that the notice was issued after the expiry of four years without meeting the requirements of Sections 147/148 of the Act, specifically mentioning the first proviso to Section 147. The petitioner contended that there was no failure to disclose material facts during the original assessment proceedings. The petitioner relied on the Supreme Court decision in Commissioner of Income Tax v. Kelvinator of India Ltd. to support the argument that a notice under Section 147 after four years, following a scrutiny assessment, is considered a change of opinion. Additionally, the petitioner claimed that the Principal Commissioner of Income Tax did not give approval or sanction for the notice, pointing to a Form in the paper book as evidence.

The Respondent-Revenue presented a detailed report regarding beneficiaries of bogus LTCG/STCL related to the Financial Year 2012-13. The report implicated the petitioner in trading penny stocks, specifically Mahanivesh (India) Ltd., indicating manipulation of share prices and booking of bogus profits and losses. The court found fresh tangible material in the form of this report, prepared by the office of Deputy Director of Income Tax (Investigation), which revealed the petitioner's involvement in trading penny stocks. The court concluded that this case did not involve a change of opinion, contrary to the petitioner's argument based on the Kelvinator of India Ltd. case.

Although the Form for recording reasons did not bear the Principal Commissioner of Income Tax's signature, a note in the file indicated the Principal Commissioner's agreement with the findings and reasonings recorded by the Assessing Officer and the Range Head. The court noted that the file contained a note where the Principal Commissioner of Income Tax granted approval, and since this document was not challenged as forged or fabricated, the court held that prior sanction was on record. Consequently, the court dismissed the writ petition, clarifying that it had not expressed any opinion on the merits of the controversy, leaving the rights and contentions of all parties open.