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2023 (11) TMI 233 - ITAT MUMBAIReopening of assessment - bogus long-term capital gain has escaped assessment - Scope of the reasons recorded by the AO - claim of the AO is that it is evident from the order of the SEBI that assessee has been held guilty and imposed apparently in the matter of said script looks health services Ltd which is subject matter of the instant assessment proceedings - allegation on the assessee that she has violated the provisions of regulation 13 (3) read with 13 (5 of CB (Prohibition of insider trading) regulations, 1992 and regulation 29 (2) of SEBI (substantial acquisition of shares in takeover) regulations, 2011 HELD THAT:- There was an abnormal fluctuation in the price of the script in which the assessee has offered long-term capital gain that is exempt from tax. Further the report from investigation Wing, dated 13/12/2016 was also made available to the assessing officer wherein price rigging in looks health services Ltd was intimated. On verification of the details of sale of shares, the learned assessing officer on examination did not find any details of purchases of shares AO in the form of information from other sources had a tangible material to reopen the assessment. On the details available in the form of information, the learned assessing officer also made his own enquiry by verification of the return of income as well as the bank statement of the assessee. The assessee also made his own enquiry on the tangible material received by him for reopening of the assessment. At the time of recording the reason only the prima facie belief is to be formed that there is a escapement of income. On careful reading of the reasons recorded by the assessee placed before us we find that the learned assessing officer has complied with all the necessary requirements of the law. The reasons are to be seen in its substance. If there is some error in mentioning some information which is not so fatal, then, on trivial matters, the reasons recorded cannot be held to be invalid or nonapplication of mind cannot be inferred. CIT – A did not adjudicate this issue holding it to be merely academic, on perusal of the reasons, we do not find that the reopening of the assessment is invalid for any reasons. Accordingly, we uphold that reopening of the assessment is invalid. The solitary ground raised in the cross objection of the assessee is dismissed. Addition u/s bogus LTCG - On careful reading of the order of the adjudicating authority, which is the main base for making the addition in the hence of assessee, is for violation of late disclosure of the particular percentage of the shares of the company and not for any other reason. Therefore, in the adjudication order, there is no allegation of any other nature which even remotely shows that the capital gain earned by the assessee is not genuine. Further regarding the acquisition of the shares, the assessee was allotted 4,50,000 shares of the company in March 2012 in private placement when the company was unlisted. Therefore naturally, during the trading period there is no purchase of shares by the assessee and hence there was no details available with the assessing officer. But that does not show, that, the transaction of the sale of the shares is not genuine. The purchase consideration was paid by the assessee by check number 212460 of Indian bank dated 2/2/2012 which was cleared in the bank statement of the assessee on 4/2/2012. Share certificate was issued to the assessee by certificate number 58. For the sale consideration assessee has given the contract note of Skyes & rayes equities India private limited showing the date and time stamp of the securities traded. There is no allegation or enquiry of the learned assessing officer about the same. Original acquisition of the shares were made by the assessee when the name of the above company is monarch health services (private) Ltd. No doubt the name of this company appears in the investigation report of the investigation wing. However when the shares were sold, the name of this company was looks health services Ltd. Naturally, there was no reference of sale of the shares in looks health services Ltd in the above report. Regarding the claim of AO in the reasons were recorded that the consideration received by the assessee was not found credited in the bank account of assessee with HDFC bank, the assessee submitted that the above sum was credited in the account of the assessee in Indian bank account number 415206490 at Fort branch. The copy of the passbook submitted clearly shows that the above amount is credited in the bank account of the assessee. This bank account was jointly maintained by the assessee with her husband. Interestingly the price movement chart shown by the assessee of the above company from the Bombay stock exchange clearly shows that the high prices of the company quoted at that stock exchange was much higher than the price at which the assessee sold the shares. We do not find that there is any reconciliation made of the trade transaction number as well as the buy transaction of affluence commodities private limited with the sale transaction of the assessee along with time and date stamp. Even in the written submission also the learned departmental representative has stated that this is a suspicious trading activity of the script because of the price movement. However, according to the departmental submission it is merely a suspicious trading. But that does not prove that the long-term capital gain earned by the assessee is bogus. There is no allegation from the side of the revenue that the capital gain earned by the assessee is bogus except the adjudication order of Sebi. DR could only show us that the learned assessing officer on the basis of the price movement of that company was directed to reopen the case of the assessee by issuing notice under section 147 of the act. We do not find any infirmity in the reopening of assessment in case of assessee, we have upheld the same. But merely reopening of the case does not authorise the learned assessing officer to make an addition in the hands of the assessee without carrying out investigation as well as finding with reasonable evidence with preponderance of the probability that the income shown by the assessee is not genuine. No infirmity in the order of the learned CIT – A in deleting the addition in the hands of the assessee. Decided in favour of assessee partly.
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