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2020 (3) TMI 1113

..... suspect - HELD THAT:- It has to be kept in mind that ‘reason to believe’ postulates a foundation based on information and belief based on reason. Even if there is foundation based on information, there still must be reason warrant holding a belief that income chargeable to tax has escaped income. A bare reading of the reasons recorded to reopen reveals that there was non application of mind before reopening the assessment. Based on an information/investigation report, the AO has jumped into the conclusion that the assessee is involved in the activities of penny stock rigging etc. It has to be kept in mind that information from the Investigation Wing(Income-tax Department) can only trigger the reasons to suspect. Then the AO to make some preliminary inquiry and collect some material which would suggest the escapement of income. AO based only on investigation report has recorded his satisfaction without conducting preliminary inquiry, which is nothing but the borrowed satisfaction from the report of Investigation Wing. The condition precedent to reopen an assessment that is ‘reason to believe’ should be that of the AO not that of the investigation wing, so in .....

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..... the Act has been issued on 21-03-2018 proposing to re-open the assessment for the AY 2011-12 in the name of Late. Sushila Choudhury. Since notice has been issued admittedly on a dead person, despite the department coming to know of this fact as early as on 09 January, 2014 according to the ld. AR, the AO s order to re-open the assessment on a dead person is bad in law. 3. Per contra, ld. DR vehemently opposed to the contentions of the ld. AR and contended that assessee as legal heir has participated in the assessment proceedings and therefore, the order cannot be faulted with the issuance of notice u/s. 148 of the Act on deceased person. According to the ld. DR, the assessee/ legal heir had fully participated in the assessment proceedings and having also responded to all other proceedings before the AO. According to the ld. DR, on this technical ground reassessment order of the AO cannot be faulted. 4. In his rejoinder, the ld.AR referred to the case laws to the Pune Bench of Tribunal in Smt. Archana Ashok Dukre Vs. ITO, Latur, ITA No. 2237/Pun/2016 dt. 15-11-2019, wherein the Tribunal on similar case has quashed the initiation of reopening itself by referring the decision of Hon .....

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..... alcutta Stock Exchange (CSE) was also artificially rigged to provide entry of bogus LTCG. A list of beneficiaries had been identified. As per the information furnished in the report, the assessee had transacted in shares of "BLUEPRINT SECURITIES LTD." and sold shares of "BLUEPRINT SECURITIES LTD." involving trade value at ₹ 3,05,800/- during A.Y. 2011-12 and the said information is also suggesting Long Term Capital Gain (LTCG) by the assessee on such sum. 3. Though, The assessee had claimed exempt income as Long Term Capital Gain (LTCG) on which STT was paid, the transactions cannot be considered genuine merely for the reason that they were carried out on the exchange platform with the involvement of registered broker through banking channel in a known sequence with no apparent aberrations. Various judgments have also held that the money came by cheque and was paid through the process of banking transactions as not by itself of any consequences. However, as discussed above the said transactions are neither verifiable from the details provided by the assessee nor it is verifiable from the return of income. The AO also had no such information before receivin .....

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..... xpired on 10-09-2012. According to the ld. AR a perusal of said reasons as recorded/mentioned hereinabove, would reveal that there was an information that a very large number of persons had taken entries of huge bogus long term capital gain (LTCG) in an organised manner through share transactions of penny stock companies listed with Calcutta Stock Exchange with the involvement of the promoters of the penny stock companies, unscrupulous brokers and entry operators. The investigation focussed on 9 penny stock companies listed with Calcutta Stock Exchange. Investigation revealed that various persons had subscribed to the shares of these penny stock companies for the purpose of claiming long term capital gain to bring unaccounted money into their books without paying of tax. According to the AO as information furnished in the report of DIT (Inv.), Kolkata, that assessee had transacted in shares of BLUEPRINT SECURITIES LTD and sold shares of BLUEPRINT SECURITIES LTD involving trade value at ₹ 3,05,800/- during AY 2011-12 and the assessee had long term capital gain (LTCG) on such sum. After noting down general modus operandi, the AO concludes as under:- 4. On analyzing the informat .....

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..... ice dt. 21-03-2018 issued u/s. 148 of the Act in the name of Smt.Sushila Choudhari proposing to reopen the assessment for the A.Y 2011-12 and thereafter made additions of ₹ 5,12,240/- u/s. 68 and ₹ 12,806/- u/s. 69C of the Act, totalling to ₹ 5,25,046/- vide order passed u/s. 143(3) r.w.s 147 of the Act dt. 11-12-2018. This action of the AO stands confirmed by the ld. CIT(A) by impugned order. Even though it is noted that the reasons recorded by the AO on 13-03-2018 for reopening of assessment shows that the AO received investigation report from the Pr. DIT vide letter dt. 21-09-2015 about the assessee having sold shares to Blueprint Securities Ltd and had obtained capital gain (long term) of ₹ 3,05,800/-, which according to the Investigation Department was a rigged transaction. Based on this information, the AO has reopened without making any preliminary enquiry and recorded the reasons to re-open. The AO before re-opening the assessment should have satisfied the condition precedent required to usurp jurisdiction under section 147 of the Act that is he has the requisite reason to believe escapement of income. It has to be kept in mind that reason to believe .....

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